In this post, we look at what selling a business during COVID has really been like. Using our experience and knowledge as one of the UK’s and Europes leading business brokers we outline the position.
It was late December 2019 that the news of a new Coronavirus in China was spreading rapidly. Like so many viruses before it, most in the UK sat, contemplated briefly and shrugged the virus off, like so many viruses we had heard about before it. Forward wind a few months and we enter a national lockdown for the first time in our lifetimes.
Hilton Smythe helps businesses of all shapes and sizes sell. Most of which in fact, bore the brunt of the closure orders in the first lockdown. In fact, many continued throughout the year to be, and of course remain affected by the constant restrictions.
The questions that we had been asking at Hilton Smythe HQ about the impact of COVID on business sales, slowly but surely started to be answered. Now that we are into our third lockdown and nearly a year on in, we wanted to share some of these answers with you.
How have buyer enquiry numbers been affected for those businesses for sale?
Enquiry numbers for businesses for sale, believe it or not, increased during the course of the first lockdown by 29% as against the previous year (COVID free 2019). One of our many core values at Hilton Smythe is honesty and with that in mind, we can honestly say that this was a bit of a shock.
What’s even more interesting, is the 4% increase in conversion between buyer and seller meetings to having agreed the terms of a sale.
Buyer demand remains strong for most sectors, even in hospitality and leisure, which have been amongst the worst affected by COVID restrictions. Business buyers are still enquiring on businesses such as these that are for sale.
“Enquiry numbers for businesses for sale, believe it or not, increased during the course of the first lockdown by 29% as against the previous year”.
Are business owners still wanting to sell their businesses?
Business owners are still keen to sell their business. We have noticed in recent months particularly, a steady increase in valuation requests from those considering a sale. This suggests business owners are still keen to be selling their business during COVID.
In the early part of the pandemic, we saw a large number of sellers withdraw their business from sale. This was likely due to the uncertainty surrounding the virus itself and not only the effect it would prove to have on their businesses, but also the effect it would have on the sale of their business too.
Our register of businesses for sale has steadily declined over the course of the COVID pandemic, something that is consistent with the entire market. This has therefore led to more buyers in the market place than sellers. This can only be a good thing for those looking to sell a business, since the pandemic has seemingly created a “Sellers’ market”, in which there are more buyers than sellers, or so it seems.
What about buyers who agree to buy but then pull out of a purchase due to constant uncertainty?
At Hilton Smythe, we typically have around 100 to 150 businesses at any one time that have terms agreed and in which buyer and seller have instructed lawyers to complete a transaction or progress with due diligence. Once the first lockdown hit, that number dramatically dropped, with buyers pulling out of a purchase almost simultaneously with the Government’s announcement of a lockdown.
As we have progressed through the pandemic, it would be reasonable to assume that a buyer and seller who had agreed terms were at higher risk of their particular sale falling through. Over time however, we have seen a 25% decrease in the number of sales that ‘fallthrough’. It is important to stress, that sales do fall through. People change their mind and unavoidable things happen; just take the COVID pandemic as an example!
In actual fact, the buyers that progress to purchase are, for the most part, more serious at present. This has contributed to the reduction in sales that have fallen through once a sale is agreed during these unprecedented times.
How many businesses have Hilton Smythe sold during the COVID pandemic?
At Hilton Smythe, we continue to sell businesses of all shapes and sizes as has been discussed throughout this article. You can visit our sold section to see recently completed sales (link in the footer). In summary, we are selling slightly more businesses proportionate to the number of businesses we have for sale than the previous year (non-pandemic times). This supports the idea that selling a business during COVID has not been impacted as much as first thought. What’s more, we are one of the best in Europe for the volume of businesses we sell which means we have some authority in this area.
Summarising selling a business during COVID.
It has been a tough time for most, more so for some of the businesses we sell. The stay at home message we had so often heard last year has inevitably impacted how we sell a small business.
The reality as we now know it is, buying or selling a business is still very much possible, even with the social distancing restrictions that have impacted so many of those businesses concerned. Potential buyers are aplenty and at Hilton Smythe we have adapted the sales process to get the best results and business valuations possible.
A key takeaway for those looking at selling a business during COVID, is that preparing your business for sale and having the right exit strategy and of course the right advisor has never been more important. Having your accounts in order, understanding the impact COVID has had on your business revenues and ensuring of course your business is COVID secure and can, wherever possible continue to trade and operate, all help to secure a beneficial sale.
It’s never really easy to sell a business, especially so it seems, during a global pandemic. If you would like to speak with a specialist about selling a business, either get in touch with us or book your free, no obligation valuation appointment with one of the team. If you are looking to buy one of our many exciting businesses for sale, you can start your journey here.