Dear :

Welcome to our March Newsletter.   

As we are about to enter the Spring of 2013, we find ourselves being asked the age old question: What does the market look like?

We are excited to report that we believe we are entering the best sales opportunity for privately owned businesses that will occur this decade. We are cautiously optimistic in the short term (6-12 months) and optimistic in the mid-term (1-3 years). Now truly may be the best time to begin to reap your personal harvest.  This is based on both national data and our local experience.  

Here is what we are looking at:

Leading Indicators

• New home starts are up. Housing sales are up. Every recovery that has included job growth in America since WWII has involved a strong housing recovery. That is happening now.
• The Stock market is up. Way up. The original "crowd source" information on where the economy is going is yelling recovery.
• Employment figures are finally beginning to rise. Not sure it is a leading indicator, but it is an important one for many lower middle market businesses.  

Economic Cycle

• One of the things we stress to business owners in our "Extraordinary Exits" presentation is just how much the economic cycle and people's corresponding emotions affect both price and terms in transactions. Recent business cycles have varied between 7 to 11 years.  

• We believe the next 3 years are going to be a full blown recovery represented on our chart with the emotions Relief, Optimism, Excitement, and Greed. Much better emotions for concluding a transaction than Fear or Panic. Clearly the next few years are going to be an excellent window to go to market and obtain better multiples.

Your Life/Economic Cycle

• Think about your personal timing. If you are 58 now, the next time we are at this point in the cycle you are likely to be 66 or older. If you are 65, the next time is likely to be when you are 73 or older.  Are you going to have the energy and interest to go through the down-cycle again?

Financing

• While still frustrating, banks are starting to wade back into financing acquisitions. Again, historically once access to loans starts easing it continues until the next recession. Access to relatively low cost debt financing improves buyer Return on Equity which raises business sale prices.

Buyers

• We are seeing multiple bidders on quality companies with discretionary earnings as low as $250,000. Better still, the buyers have an enthusiasm about the "deal" we have not felt in years. The key is that companies must be well organized and buyers must be able to see that the earnings are transferable.

Conclusion

• We think the next three years are going to be the best opportunity of the decade for many sellers. Now is the time to begin the process of going to market or, if not quite ready, preparing to go to market in order capture the full benefits. This is Your opportunity to reap your personal harvest.   

• If you would like to know more about preparing your company - or what your value might be - or if you are ready to get started please give us a call or a click.

                           -by Greg Caruso, Partner 

Ed Davis (301) 325-7687  Email    

Glenn Molin  (540) 287-1776  Email 

443-334-8000