If there is one thing Ryan Binkley has learned as President and CEO of Generational Equity, it is that when it comes to selling your business, timing is everything. That is why the featured article in his latest monthly newsletter was devoted to the number of baby boomer business owners that are expected to retire in the next 10-15 years. It is information such as this that will play a significant role in your exit strategy if you want to sell for the optimal value.
You see, the M&A market is in many ways dictated by the dynamics of supply and demand. So, if there are more sellers than buyers on the market, then business valuations will typically drop and it will take longer to find the right buyer for your company. Ryan recognizes that this scenario could be on the horizon in the next decade, which is why he’s urging those contemplating an exit to start giving it some serious thought.
The Impact of Baby Boomer Business Owners
According to Christopher Nicholas of Shields & Co., there is a substantial number of U.S. companies that are owned by those considered part of the ‘baby boomer generation.’ Speaking at ACG Boston’s DealSource Select, Christopher stated:
“On the supply side, we have about 60 percent of the 15 million privately held businesses in the U.S. are owned by business owners born before 1964.”
Ryan Binkley and his team at Generational Equity are well aware of this fact, which is why the firm makes it a priority to educate business owners about this at their executive conferences. That is because timing your exit is essential to securing the maximum value for your business – if 9 million businesses need to transition to new ownership in the next 15 years or so, timing becomes even more critical.
Now, these millions of businesses will not enter the M&A market all at once. But, over time the number of companies available will begin to stack up, making it increasingly difficult to stand out from the crowd. You may be thinking “Well, this won’t impact the value of my business when I decide to sell – it’s enjoying consistent revenue growth, has a skilled workforce and represents a thriving industry.”
But don’t underestimate the value of time, because when exiting your company it can be your best friend or your greatest rival. According to Dealogic, a trusted partner to financial firms across the globe, just over 100K M&A deals were announced between 2007 and 2016, approximately 10K per year.
Now, you don’t have to be a master mathematician to work out that the sheer number of baby boomer business owners will swamp this balance. Even if you account for the fact that 50% to 60% of transactions go unreported each year, it still represents a massive imbalance.
This is the reason Ryan wanted to spotlight this information, because without it, business owners throughout North America risk leaving money on the table when they decide to sell. The law of supply and demand is set in stone – too many sellers will drive company valuations down, while simultaneously driving the time to close a deal up. This is a far cry from the current seller’s market we’re experiencing in the M&A industry, which has helped Generational Equity hone in on $4 billion in wealth created for its clients.
Time to Step Up Your Exit Strategy?
With this in mind and playing to his years of experience at Generational Equity, Ryan Binkley’s advice to business owners is to move now if you’re thinking about the exit. Of course, you shouldn’t force yourself out the door if you still love what you do. But, with a significant number of businesses set to flood the market over the next 15 years, good timing will be essential to securing the optimal deal for your company.
Discover more about Generational Equity’s services for business owners interested in exiting on their website, as well as Ryan’s role in the firm’s continued development. You can also learn more about Ryan Binkley on this website.