Let’s get right to the point: if you’re thinking of buying a business, this is the best time in recent years to do so. After all, buying a business is an opportunity to increase revenue and immediately enhance your portfolio.
The pandemic has brought some businesses to their knees. But for others, it’s provided unexpected opportunities for growth.
Although there’s some risk involved with mergers and acquisitions right now, deals are plenty.
Reason #1 to Buy a Business – A Chance to Create New Services
Market demands are ever-changing, especially given the current economic crisis. Buying a new business would allow your company to add valuable new products and services to your offering.
This means you can meet new market demands and open up new revenue streams. And this strategy has another big advantage: it can eliminate the need for more R&D spending, too
Acquiring new technologies and products, as well as adding new employees, can be enormously helpful – in both the short-term and long-term.
Reason #2 to Buy a Business – Prices Are Lower
Most sellers don’t want to sell their company to just anyone. Sellers are usually very demanding when they’re in a strong bargaining position.
But that’s not where they are at right now…
Many sellers have realized that they’re working harder than they’ve ever worked before, making the same (or less) cash. The pandemic has made certain entrepreneurs “tired” and they want to get out.
That’s just one of the many reasons why, today, it’s the buyer who holds all of the cards.
Sellers are less demanding and their expectations are considerably lower, as are company valuations. This forced need for flexibility is what brings new opportunities to less-affected investors.
Why are valuations lower? Because most companies get valued based on multiple earnings. This is no longer the case post-pandemic. A realistic valuation would be up to nine times a company’s EBITDA for 2019.
Closing purchase prices have also dropped down to 60% of what they used to be. These factors favor you if you’re willing to expand now and create new value for your company.
One more thing you should consider: this is a great time to buy a business overseas or across the border. Companies in countries with weak currencies (even Canada, which has a weaker dollar) are more attractive to U.S. investors.
Reason #3 to Buy a Business – Many Startups Need Cash
Here’s another reason to seriously consider acquiring new businesses: many startups are in a dire situation right now… And many of them show promise.
But with all the current uncertainty, investors are not anxious to fund a startup.
New companies, especially tech companies, need an influx of cash to survive this crisis or they might go under. Here is where you can come in as a strategic buyer in your sector.
A new startup may be more inclined to sell and cut its losses at a time when funding is drying up. Due to their unfavorable position on the market, many founders can’t afford to wait for better offers.
Consider Buying a Business Now to Profit in a Post-Pandemic World
Some business owners are more motivated than ever to sell. Companies in your niche that could have been competitors this year might be willing to entertain the idea of a merger or acquisition, if only to ensure their survival.
Even though there’s less face-to-face contact now, plenty of discussions will still take place.
The pandemic has slowed down the pace of merger and acquisition deals going through. For companies with enough capital, this is a blessing in disguise: lower costs, owners eager to sell, and many companies in dire need of capital. This economic crisis is ripe with opportunities for the strategic buyer.
Do your due diligence and focus on buying businesses that can add the most value to your company. You don’t have to focus on it right now, but understand that the pandemic will end and your company can offer new products and services as soon as things get back on track.
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