The latest news reports tell us that "Staffing firms added close to 400,000 new jobs in the past year, an indication that the economy continues to slowly dig out of the 'great recession,'" says Richard Wahlquist, ASA president and chief executive officer. "While ASA members expect that growth to continue, they report that businesses are being very strategic about adding back permanent jobs, timing employment increases with sustained increases in demand."
In this improving environment what motives do sellers have when considering a sale of their business?
Selling your staffing business may be the single largest transaction of your career and there is no dress rehearsal. Most business owners have only one opportunity to sell a business, so it's important to get it right.
This is an important decision because of its potentially far-reaching effects on your family, staff, customers, employees and yourself.
Sellers rarely decide to put their business on the market on the spur of the moment. A great deal of thought and analysis usually precedes such a decision.
Common Objectives for a sale
Most owners have one or more reasons for selling before they make the final decision, which include, but are not limited to:
� Creating an exit strategy for the shareholders due to aging, failing health, burnout or a wish to retire
� An unwillingness or inability to invest needed capital in the business
� Cashing in by liquidating some or all of the value in the business.
� Lack of a suitable successor, but a desire to see the firm continue
� Partnering with a larger firm to gain greater resources for growth and access to broader and more sophisticated programs and infrastructure
� The opportunity to participate in managing a larger business, territory or sector.
Current Market Environment Tougher
Today's environment for selling is very different from the market of just a few years ago and better than one year ago. Some of the characteristics of the current marketplace are:
� An uncertain and less stable economy
� Fewer publicly owned buyers, more regional and local buyers
� More private equity (PEG) money is available to fund acquisitions, but there are stricter requirements to invest
� Most PEG buyers are looking for firms with annual sales volume of at least $20 million to $50 million (depending on the sector) to serve as a platform for expansion, unless they have their platform and want tuck-ins
� More private firms buying, many for the first time, working with less flexible multiples, fewer human resources to devote to the purchase and less experience acquiring and integrating
� A decrease in single-suitor deals, giving sellers more choice
� Increased due diligence scrutiny of current sales and profit performance by buyers.
Is there still a market?
Not all the news is negative. There are still buyers available for staffing firms; in fact we continue to have more buyers than sellers.
While every buyer likes a good bargain, not all buyers are bottom-fishing for distressed companies. In fact, most buyers want to acquire solid firms that may have easy (for the buyer) to address challenges. Experienced buyers are wary of so-called bargain firms; they may be acquiring a costly albatross.
Buyers can make substantial improvements to a staffing firm that is struggling in these times by adding needed capital, offering better workers compensations programs, offering additional services to the sellers' customers, having additional locations and resources for the sellers' customers and by offering more training and advancement opportunities for the sellers' staff.
Realistic Valuations are needed
Both buyers and sellers have to be realistic about market value. Valuation has been a source of disconnection on past deals. We find buyers today to be more reasonable in their valuations as fewer good staffing firms are available thus creating a greater demand for high quality firms with predictable results.
If the uncertainties in the economy are affecting your comfort with selling your business call us for a free consultation. It is always good to have options and know what can be done.