Mirus Capital Advisors

General, Mergers and Acquisitions, Pre-sale Planning, Family Business

When is the right time to sell a business in a pandemic?

Many business owners who were considering selling their business pre-COVID-19 are now trying to figure out the implications of the crisis on starting a sale process. A few factors to consider:

1. Evaluate how hard your business has been hit by the crisis. Valuations may be close to pre-COVID levels for businesses that remained relatively stable (or grew) through the crisis. For a retailer or other business that has lost a significant portion of its income for an extended period, it may be advisable to wait until you have some data showing sales returning to a more typical level; otherwise, the uncertainty is likely to reduce valuation.
2. Consider how long you’re willing to remain with the business. A typical sale process takes 6-9 months, and most buyers will want a former owner to stay on as an employee or consultant for a year or more post-closing. If you’re looking to retire or move on to the next thing within the next two years, now’s the time to get started.
3. Who are the likely buyers and how are they impacted by COVID-19? If you believe that the best buyer for your business is likely strategic, and your sector has been hit hard by the crisis, many large organizations may be struggling with their own operations and cash flows, and may not have the capacity or interest to do a transaction right now. If there is an adequate pool of strategic buyers with healthy balance sheets, or if the transaction may be a good fit for private equity, it’s more likely that you’ll have a strong level of interest in the near term.

We’re hearing from many financial and strategic buyers who are actively seeking deals. Further, with videoconferencing and virtual data rooms, it’s possible to complete nearly all of the deal process remotely, and we are seeing deals moving forward despite restrictions on travel and in-person interactions.

Even if you’re not ready to start a process today, it’s a good time to start thinking about how to prepare for a process, such as by undertaking a financial audit or review, getting your corporate documents in order, or working with an investment banker to start thinking through how to position a business for sale.

Kate Soto is a partner with Mirus Capital Advisors. She works with owners of middle market businesses and can be reached at soto@merger.com.