A new year. A time to reflect, looking back to look forward. As business brokers, we reflect on last year and share our thoughts on what we think will carry forward into this year.
Many were happy to see 2021 end: especially as the pandemic continued affecting home, work and school. However, if you opted to sell your business last year, you may have a different perspective on 2021, as sellers generally did well by selling in 2021.
So, what from last year will affect buying or selling a business in 2022?
- The Pandemic
The pandemic has fueled growth in select industries and has presented ongoing challenges to others. Sectors that have fared well are expected to continue to be of high interest to buyers. If you own a business in construction or construction services, manufacturing, liquor stores, e-commerce, pet care or professional services, 2022 may be the year to consider selling. There is great interest in buying businesses in these sectors, typically with multiple bids. Data published by Private Equity Info released the top industries for 2021 private equity platform investments with software, manufacturing, healthcare, technology and food & beverage as the top 5 industries. Education and e-commerce were in the top ten.
The pandemic has presented significant challenges to businesses in other sectors, including brick and mortar retail stores and fitness. Such sectors spent months closed, then started to recover until the surge of Omicron. We expect businesses in these sectors to continue to face challenges in 2022.
- Global Supply Chain Issues
Supply chain issues continue to affect a wide variety of industries and it is expected this trend will continue this year. Finding alternatives or creative solutions to address a global issue can be an overwhelming challenge for a business owner. As the supply chain disruption continues, we expect this to be a factor this year in business owners choosing to sell, given the stress and strain of a global issue that is so far reaching.
- Labor Shortages
In November of 2021, a record number of people in the United States left the labor market. The pandemic is a driving factor in people retiring early or quitting their jobs. The result for business owners is that there is a significant labor shortage in almost every sector. The effect on business owners is significant and serious and there is no end in sight for resolving the labor challenges in the United States.
If you are thinking of selling your business, having a quality labor force, including tenured staff, to offer as part of the sale is a significant selling point when marketing your business. Buyers, strategic and individuals, are placing more emphasis on the existing workforce when evaluating a business, due to the labor shortage. Many strategic buyers are purchasing competitors for their employee pool, versus trying to hire themselves.
- Baby Boomers
Last year was the first year we saw many baby boomers selling their businesses to retire. We expect this pattern to continue as generations choose not to continue running the family business and people opt for having a better work/life balance and retire earlier than planned. The thought of forging ahead to survive another recession or rebuilding a business becomes too much for business owners who were near retirement before the pandemic. The pandemic reminded many of the frailty of life. Expect to see many long established, mature businesses on the market in 2022 and for several more years.
2022: A Seller’s Market
This year starts with a strong seller’s market that we expect will last throughout the year. There are more interested parties, such as individual buyers and strategic buyers including private equity firms, looking to buy than the number of businesses for sale, presenting great opportunities for sellers to entertain multiple bids and strong prices.
Growth via acquisition is a common strategy we are seeing as business owners choose to expand capabilities, expand into complementary businesses or expand geographically. The strategy of acquiring as opposed to growing organically for many companies tends to make more sense given the current economic challenges including labor shortages. Acquiring the workforce has become an important focus of buyers that we expect will continue to be an important criteria this year.
For sellers whose business includes real estate, we expect the market to continue to be strong this year as there is great interest among buyers in acquiring real estate, and commercial real estate values remain solid.
Here to help you evaluate if 2022 is the year you sell.
If you’re thinking that 2022 may be the year to sell your business, contact us for a complimentary consultation to help you make an informed decision. Every situation is unique and we offer vast experience and industry expertise to help you make this important decision.