2018: A Great Time to Sell Your Business
If you’re contemplating a retirement, looking to make a leap elsewhere, or need greater liquidity, 2018 may be the most favorable time to sell a business we’ve seen in a while. Ongoing low interest rates, trillions in available capital, and a skyrocketing stock market are three factors making 2018 an ideal time to sell. This is a robust seller’s market, and there’s no way to predict when it might end. So business owners who take advantage now, and who hire skilled M&A advisors, stand to reap plentiful rewards.
Key Factors Making 2018 a Great Time to Sell
Three factors are converging to make 2018’s market one of the best seller’s markets we’ve seen in years:
1.) Historically low interest rates: In spite of recent rate increases, interest rates remain very low. Low rates mean easier financing. Jerome Powell, the incoming Fed chairperson, indicates he intends to continue the trend of slowly raising rates. This means now might be the most favorable time to get a low rate—though interest rates will continue to remain at historic lows.
2.) High stock prices: Both the NASDAQ and Dow Jones have hit record highs. This can increase access to funding for publicly traded entities hoping to expand via acquisitions. An acquisition is a low-cost, fast way to grow. As the stock market rises, available capital to fund deals increases.
3.) Dry powder: In the world of M&A, dry powder refers to unused capital that can fund a deal. Private equity firms have access to hundreds of billions in dry powder, and many are just waiting for a well-run business into which they can invest their capital. Intelligent business owners should consider how to make themselves more appealing to PE if they plan an exit this year.
Timing is Everything
The unfortunate reality of many M&A transactions is that most sellers wait until an outside force compels a sale. They delay until the company begins declining in value, or they wait until they’re ready to retire, then rush through a deal. The better strategy is to time your sale in conjunction with market factors.
Some owners also make the mistake of waiting too long. They assume that a favorable seller’s market will continue getting more favorable forever. That’s never the case. The decision to sell always requires a little faith combined with a lot of knowledge. So if you’re weighing the risks and merits of a sale, consider working with an M&A advisor. Your advisor can help you assess not only market forces, but also how industry factors affect those forces. This is the best strategy for determining whether now is the best time to sell.
Preparing for a sale can take time, and the more preparation you undertake, the better. So don’t wait for the market to begin turning downward. Work with a team that can prepare you for due diligence, and begin adding value now. 2018 may be the best time in years to sell a business, but there are no guarantees for 2019 or beyond.