During the last 12 months, we have experienced an increase in volume of companies purchasing related or synergistic companies and there are a number of contributing factors.
One of the driving factors is the strength of local market. This is helping fuel the activity in many ways.
In one way, there are a number of companies who are doing well who can afford the capital to fund growth. A good example was a Reno-based contractor who purchased a similar business in Carson City to increase market share.
But for all the companies that are doing very well, there are some that aren’t.
Some owners are plain tired and don’t have the stamina anymore to answer the bell. As the saying goes, “its better to sell out than burn out.”
This is what happened with the auto repair owner who sold his business to a competitor.
Another recent phenomenon that we are seeing with the growth of the economy is that in many cases, the quality of workers is diminishing, yet the demand for them is increasing. As a result, we have businesses looking at acquiring other similar businesses not only for their cash flow and hard assets, but also to fill their employee void to meet their growth needs.
This is the motivation behind a number of local shops looking to acquire a similar business who is one of our clients.
There are a number of strategic mergers that have occurred recently. One of my favorites is the local printer who acquired another local printer.
They had two independent revenue streams which were able to support the operations of each company. Now, as a result of the merger, the new entity is strongly positioned to service the needs of both companies’ customers.
This new entity proves the old adage that “the whole is greater than the sum of its parts.”
We are even seeing franchises acquiring each other. We have a deal that is scheduled to close shortly where one service franchise is buying another service franchise.
What makes this transaction unique is that the two franchises are unrelated and in completely different service sectors.
And finally, the strength of our local economy continues to attract out-of-state companies looking to enter our market. We have a number of well-established local businesses that are getting a lot of interest, not only from northern Nevada suitors but also from out of the area.
For owners considering selling their business to companies such as the outlined above, it’s imperative that their identity remain confidential until a buyer has been qualified as not only interested, but financially able to complete the transaction.
Imagine the damage that can be caused to an owner and their business when mischievous competitors find out that they are considering selling. This is where a qualified and experienced business broker really earns their pay.