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Selling a business is complicated, emotional, takes time, and is subject to a range of variables that are often out of a business owner’s control.
All of that can be overlooked when market conditions appear to be positive, as they do now. When recruitment industry transactions are being announced regularly, business owners can be optimistic about all aspects of their business, the sale process, and (especially) business valuations.
Timing is everything. Business cycles continue despite efforts of governments and central banks to smooth out the intertwined global economy. The positive conditions we enjoy today include low interest rates, a suitable time-period from the last major global recession, an industry in a state of change that is generating acquisition activity to position businesses in new markets and new geographies, and a relatively stable economic and political climate (even if it does not seem that way).
We often meet business owners that are super confident of their plan to sell to a large player in the market at a time of their choosing and for a top price. It is clearly illogical to base your business strategy on the future corporate plans of an unrelated company that you cannot influence.
Related: Exit Strategies for Micro Recruitment Agencies
A reality check is called for.
Forecasting a particular time in the future that will be conducive to M&A activity is very difficult, especially since business confidence plays such a large role in divestment and investment decisions.
A recent SIA Executive Forum considered where we might be in the business cycle and the impact on staffing industry M&A activity. Using the analogy of baseball, the consensus of a panel of investment bankers was that we might be in the 7th or 8th innings of the cycle. Certainly not the 2nd or 3rd innings. Consider that it may be 5 years, 7 years, or even 10 years before this stage of the cycle comes again.
As a business owner you cannot operate in a standalone manner in the market. When your strategy says it is time to exit, the options you are seeking may not be available or may not be available at the price you expected. Unlike say housing, where you tend to exit and enter in the same market conditions, most business owners are undertaking a once-off transaction that is critical to their future wealth creation.
This is not a process to be undertaken without careful consideration and full awareness. One objective for business owners should be to always be “sale ready” so that if circumstances are right then opportunities can be executed. Being sale ready includes having a strategy, showing progress against that strategy, keeping financials in a clear and open format, and having compliance and administration processes in good condition. For the owner it also requires clarity about future personal objectives.
You need to seek advice of industry specialists. Conferences such as the SIA Executive Forum, the Global Recruiter Asia Pacific Summit and others provide a platform to network and to discuss relevant issues. Reading widely about the industry and its changes and trends, subscribing to research, and following the latest merger and acquisition activity can help prepare you for your future activity.
Updated article by Richard Hayward and originally published in Global Recruiter
