Business Finance - Mid-corporates difficult to sell

Nearly 60% of mid-corporate business owners trying to sell their businesses are struggling either to find a buyer or get a good price.

This is the picture which emerges from a survey conducted by Grant Thornton Corporate Finance.

Compared to the height of the UK Stock Market (December 1999), business owners have had to reassess the value of their businesses with 36% reducing their asking prices by between 10% and 30%; 5% by between 30 and 40% and 9% by above 50%. Another 50% are sticking to their guns and not budging from the prices they could achieve back in 1999 and 2000.

'The motivation of over 40% of business owners wanting to sell their businesses is retirement while almost 40% do so because they want to make a profit. However, in order to achieve a sale, a good dose of realism is a key ingredient. The fact that 50% of business owners looking for a sale are still asking for 1999/2000 "dotcom boom prices" is simply not in line with the market and is a sure way to keep the for sale sign up for a long time,' says Andrew Roberts, head of disposals at Grant Thornton Corporate Finance.

'Trade buyers matching vendor expectations are becoming more and more of a rarity, often forcing business owners to sell to management teams while retaining a financial commitment themselves. We expect the upward trend in MBOs to continue and often with vendor financing. Paper considerations, where a share issue funds part of the deal, is on the increase (from an average of 2%-3% during 2002 to 16% during the first three months of 2003).

Trade and financial institutional purchasers will return if the stock market continues in its improvement and regains greater investor confidence,' concludes Roberts.

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