First, buyers are out there looking for businesses to buy. The phones are ringing again.  We are seeing more interest and activity - not as much as in the best of times but a real improvement over six months to a year ago. For much of 2009 and early 2010 we simply were not seeing interested buyers. Now that has changed for the better. We are also seeing that pricing, based on a multiple of cash flow, is generally holding up. That is, we are not seeing an appreciable discounting of price. This compares favorably to the housing market which has seen roughly a 30% price decline. Further, the banks are lending on these deals.  Financing has not been a significant hurdle for our deals.  That's the good news.

However, we are still seeing a slowdown in actual closings (sales of a business). We attribute this to perceived risk on the part of the buyer.  The business owner sees all the positive signs in the economy where the buyer sees mostly negatives. Buyers seem to have lost some of the gumption (a much lower standard than "Irrational Enthusiasm") they used to show when buying a business. An investor has to believe that tomorrow will be better than today. If you are not convinced the stock market is going up you, keep your money on the sidelines.  If you believe the economy is still in trouble, you hold off the purchase of the business.  While some investors are feeling more positve, there are not enough...YET.  Uncertainties in the economy and business regulations slow down the pace of transactions.  

In summary, we are seeing a lot more M&A interest and activity than a few months ago and pricing is generally holding up. However, actual closings are still slower than normal due to hesitancy on the part of buyers to fully commit. Call it a case of nerves.

Regards,

Jon Fudeman

Jfudeman@BeaconEquityAdvisors.com

(978) 293-3128 - Direct