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Seasonality in Markets for Private Companies
2/2/2017 - Buying A Business
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‘Tis the Season … to Get Ready! Buyers want to buy your company; they do not have to buy it. There are certain times of the year that buying activity slows down. Transactions close during these times but buyers are hesitant to look at new opportunities. In order to get velocity in the market place, and the subsequent interest, it is best to enter the market at the proper seasonal time.

Competition to buy a company creates the highest and best offer the market will tender while empowering an owner to choose the most appropriate successor. Entering a market during a slower season will result in fewer buyers, less interest, and less competition to buy the company. However, a carefully planned market launch will result in greater competition for the company and commensurate better results.

Over the last 27 years we have found it takes approximately 45 to 60 days to prepare a company for confidentially opening a market to create competition. If we reverse engineer the process, an owner needs to begin the process at least 2 months prior to entering the market.

In sticking with the reverse engineering theme, when do we NOT want to enter the market?

  1. The last week in July until Labor Day … this is prime vacation season. Remember, no one has to buy your company although they may want to buy it. Many buyers are simply checked out at this time.
  2. April … many people are focused on their taxes and although it doesn’t make sense, this is a historically slow time for deals.

Therefore prime seasons for a market launch to create velocity in the marketplace are:

  1. New Year’s Day to April 1st.
  2. April 30th to the last week of July.
  3. Labor Day to Thanksgiving.

We know it takes 45 to 60 days to prepare a company for market. Therefore, for example, to hit the post Labor Day market, eMerge must be engaged by the owner in early July.

Remember, when factoring in a season to launch, it takes 11 to 24 months to close a transaction. Please consider these times as you plan.

Yes, we have a presidential election coming up. Should you wait? Why? Someone will win. Regardless of who wins, we have a $20 trillion debt which means taxes have to go up and your sale proceeds will go down. Interest rates have already had their first increase which has affected the value of your company downward. Companies owned by baby boomers will soon start flooding the market - supply and demand.

We are in the best market since mid-2008. It simply cannot get any better. But, given these time lines, if you started right now, you need to be concerned about the market in mid-2017.