Roughly 10,000 baby boomers will turn 65 today and that trend will continue over the next 14 years, according to the Pew Research Center. For those who own a business understanding the value of the business they have built is vital to knowing whether they can afford to retire.
“Most business owners do not have a formal plan to exit the business and without a plan they risk not receiving the real value of the enterprise they have worked so hard to build,” said Carl Doerksen, Director of Corporate Development with Generational Equity, a Dallas based M&A advisory firm. “Often they don’t realize that there are buyers from the U.S. and around the world who may have an interest in acquiring their company.”
“Sometimes just looking around someone’s offices gives us clues to hidden value they may not recognize,” said Terry Mackin, Managing Director, Mergers & Acquisitions with Generational Equity. “That plaque as ‘Supplier of the Year’ is an indication of a strong business relationship with a major customer. This relationship may be of great value to a buyer who offers other complementary services or wants to expand into a specific market or business segment.”
“Key employees are another important factor. Non-compete clauses, employment contracts and the employee’s relationships with key customers and vendors are an asset that has measurable value,” said Doerksen.
Far too often, business owners receive tentative purchase offers from competitors which may be far below the businesses real value. To maximize the value of a business it is important to cast a wide net for buyers that may include private equity firms, strategic players, foreign investors, family offices, high net worth individuals, and businesses seeking to expand in a specific market or market segment.
For example, according to the National Committee on U.S. – China Relations and Rhodium Group, Chinese companies and investors spent almost $46 billion on acquisitions and new establishments across America since 2000, much of it in the past five years. The report says the U.S. could receive between $100-200 billion of investments by 2020. These investments are being made throughout the United States including: North Carolina, Illinois, New York, Virginia and Texas.
Other countries making multi-billion dollar investments in the U.S. include: Japan, United Kingdom, Luxembourg, Canada, Switzerland, Ireland, Netherlands and Norway.
One factor far too many entrepreneurs take for granted is that the U.S. economy and its business environment is by far the largest and most stable in the entire world. It makes for safe investing, and offshore buyers clearly know this fact, making U.S. based businesses attractive right now.
For example, Stern Rubber was founded in 1969 as a manufacturer of compression, injection and transfer molded products, as well as extruded rubber products. Stern was acquired in late 2015 by Zhongli North America, Inc. (Zhongli), headquartered in Shanghai, China.
“We had numerous interested buyers throughout our process,” said Chris Heckert, Managing Director Generational Capital Markets. “Many wanted to relocate the business away from its location in Northern Minnesota but the client strongly preferred keeping the business, and its jobs, in the community. I’m proud we achieved that important goal.”
The bottom line is that many business owners who feel they can’t afford to retire may well be able to retire comfortably if they better understand how to achieve real value for their years of hard work and dedication to their business. For more information, visit www.genequityco.com.
