I’ve previously written blogs on the importance of syncing internal personal timing with external market timing when selling a business for optimal results. Internal timing considers factors personal to the business owner (e.g., I want to sell when I’m 65), while external timing accounts for the state of the economic landscape in which the business operates, and which market conditions are optimal in order for an optimal sale. While following (and predicting) market trends is never easy, COVID-19 has created a new outlook for both internal and external timing and how to sync them in the future. Before a business owner looks to sell, there are a few items to evaluate before proceeding.

For internal timing, presuming your business has survived during this pandemic, business owners will need to consider their “new” business reality. Will business be better? Need to change? Partially contract space or employees? Has the owner’s existing objectives changed as a result? COVID-19 put personal and professional stressors on individuals and their businesses like nothing we’ve ever seen before, at least not seen in recent memory. When looking at internal factors, a business owner may consider the analysis set in the PAEI model, also known as the Adizes Methodology. In short, the methodology is a set of practices and procedures for optimizing organizational function on an ongoing basis, carried out by the management team of your business. You can read more about it here. Ultimately, you’ll want to figure out whether your business is structured correctly for an M&A market, and whether or not your employees will be in it for the long run.

Externally, business owners need to be educated and informed about the changes happening in their industry, sectors and even geographies.  A forward-looking mindset considering these variables as well as other influencers (such as the upcoming presidential election) should all be considered as an owner determines the optimal time to sell.  And then there are unpredictable market influencers such as COVID-19 that quickly changed markets from a good M&A marketplace to virtually no M&A transactions closing in the middle market. According to Forbes, the U.S. is down 39% from 2019’s first quarter. Globally, the U.S. is down to 35%, marking its lowest level of deal making since 2012.  Covid-19 will pass and for those business owners seeking to sell external timing considerations will need to be evaluated in the new normal.

In the end, M&A is complicated and timing (internal and external) can make all of the difference between an optimal valuation and a successful deal and a poor valuation and an uncertain transaction.

If you have any further questions on the market and whether or not it’s a good time to sell, or to start considering selling, don’t hesitate to reach out to me at mmercurio@offitkurman.com