Not all businesses will be saleable, but let’s try to save the ones that can be sold.
Let’s save the businesses the banks would destroy The following is the opinion of David Newport, a director at business brokers Switch Business: A question often asked of us during the current market downturn is: ‘where are all the distressed business opportunities?’ It is a good question because there are certainly very few businesses being marketed by brokers at present. Those firms that are up for sale are, in the main, smaller, less mature businesses which would always struggle in the challenging economic climate we find ourselves in. The distressed opportunities that qualified, experienced purchasers are looking for are quality businesses, which may be struggling to keep afloat solely because of the debt levels they were saddled with going into the recession. You may recall that, in those halcyon days, the big four (Australian) banks were fighting each other to lend money to business owners and purchasers all throughout the decade until the tap was turned off in spectacular fashion in early 2009. If you purchased a business, or borrowed for expansion in late 2007 or 2008, your business would almost certainly instantly break the covenants you agreed to when you took on the loan. Now – in most cases – there would be very little wrong with the business at all, but the owner would have to focus on how s/he can hold off their bank long enough to ride out the recession. His/her eye would not be focused on developing the business, but rather on creating any number of reports each week to satisfy the voracious bank. The lenders, in this type of environment, are likely to overreact to any cashflow problems, however short-term, and may well force the sale or liquidation of an otherwise perfectly sound business. How did we get here? Because of the competition between […]