Where on Earth are all the business buyers coming from? (October 2010)

Where on Earth are all the business buyers coming from? (October 2010)

During this year to date there has been a very noticeable increase in enquiries for businesses being offered for sale in the Westcountry from prospective buyers living abroad. Moreover, and much more significant, growing numbers of these people are seriously pursuing their interest in acquiring businesses in the South West as is demonstrated by them flying to the U.K. in order to meet business owners and take an in-depth look at their businesses.

In recent months we at Beardsley Theobalds introduced people from New Zealand to one of our vendor clients. They came over specifically to pursue the idea of acquiring our client’s business and this level of commitment – travelling from literally the other side of the world – certainly sent the right sort of signal that their level of interest was indeed very serious! In addition, during the same few months, we introduced to seven of our vendor clients prospective buyers from such places as U.S.A., South Africa, Angola, Nigeria, Malta, Poland, France and the Channel Islands. These people, of course, are in addition to the majority of prospective buyers we introduced to our vendor clients during the same period from all parts of the British Isles. As has often been said, and our experience seems to be bearing it out, the world is certainly becoming a much smaller place! Negotiations are now underway in respect of a four of these businesses and in another case a sale has now been agreed.

It is also interesting to note the level of sales being achieved without the need for conventional financial support from banks. Increasingly, we are seeing many more cash buyers and these include growing numbers of people who have been made redundant – and who never again want to go though a similar experience and who are therefore turning to the idea of buying a business as the way forward, which they believe will give them much more control over their working destiny – many of whom find themselves in a financial position (with mortgages cleared, children grown up and left home, savings available and redundancy payments received) which readily enables them to buy businesses. We are also experiencing a growing trend where significant numbers of people are arranging loans through family or friends – often with the ‘lenders’ in such instances taking a stake in the business rather than simply just accepting interest payments on their capital! This is particularly prevalent where people who have hitherto been able to live comfortably off the interest earned from their capital, but who are no longer able to do so, putting up the money to allow someone to acquire a business and, as a result of their investment, receive a much higher rate of return than they are otherwise able to achieve.

Despite the increasing appetite for business purchases coupled with prospective purchasers’ financial ability to buy, the majority of people are being continuously frustrated by the lack of availability of quality businesses. This has led to sale prices currently being achieved in excess of what was the case prior to the recession, often as a result of several bidders all wanting to buy the same business! The ‘mismatch’ between the number of people wanting to buy a business and the number of businesses available to them is a clear signal that this is indeed a good time to sell.

Roger Mundy, Managing Director, Beardsley Theobalds