For the past 40 years Dennis Cornelius has been providing financial advisory services to clients on both sell‐side and buy‐side engagements in various industries, including manufacturing, software, transportation, distribution, food and advertising specialties. Professionals regularly reach out to him to get his advice on deal structures and related business topics. We asked him to share some of the questions recently asked of him – and his answers.
When it comes to selling their business what differences in attitude and perspective do you see between Baby Boomer business owners and younger business owners?
Older business owners tend to be more emotionally invested in their businesses. Their enterprise is as dear to them, almost, as one of their own children. People get emotionally attached to their homes and cars, and selling even these “minor” investments can be wrenching, which leads, to another set of challenges.
While younger business owners may also inflate the value of their companies, they tend not to be as emotionally involved in the business, although they may not say that. Older owners likely boot-strapped, with the requisite blood, sweat and tears, their growth to wealth and success. Most younger business owners created growth via acquisitions, venture capital and private equity. Dreams of being the next Google, Facebook and Amazon drove them; a bit different from the many family-owned manufacturing businesses that knock on our doors. The business owners of more recent generations see selling a business as the point of creating it and are eager to move on to the next business project or another grand adventure. Boomers are looking to leave a legacy for their families.
A recent cover story wrapping up 2015 in Mergers & Acquisitions queried: “Has the middle market come to a dead stop or is this a momentary pause?” Your thoughts?
Nonsense. As far as CKS is concerned there’s neither a dead stop nor a momentary pause. We’ve been getting emails and calls from many owners interested in getting their business ready for sale – even five to ten years out – and buyers are out shopping. This is an incredibly lively time. To quote Joel (Strom) from last month’s newsletter, “companies that came through the recession strong were, and continue to be, highly attractive to the right strategic buyer.” We have buyers who have been sitting on funds for more than a few years and are ready for the right deal(s).
What areas of the marketplace are particularly active right now?
Related to the previous answer, we are seeing prices increasing because of the number of such buyers; most notably in healthcare, technology and other basic industry sectors, such as manufacturing, distribution and transportation. Healthcare is now the fastest growing industry in the U.S economy. It is relatively immune to economic cycles and considered recession proof. And the others are hot because the economy continues to show signs of strength, by example new highs in the public markets, and there is still an abundance of cheap capital.