Supply and Demand: The Baby Boomer Impact on M&A

As most of you are aware, timing is critical in selling a business. A variety of issues beyond your control can have an impact on the eventual sale of your company. External factors – like changes in the economy, availability of funding, and the rise and fall of interest and tax rates – can have a profound effect on the value and salability of a business.

However, a new dynamic must be added to this list: The impact of the pending retirement of millions of baby boomer business owners.

Astounding Facts About Baby Boomer Business Owners

  • Approximately 40% of the family-owned businesses in the United States are expected to experience a leadership change in the next five years due to baby boomer retirements.
  • Some sources estimate that almost $5 trillion in liquidity is expected to be created by 2015 as aging baby boomers transition out of their closely held businesses to retirement.
  • Beginning on January 1, 2011, the oldest of America’s baby boom generation started turning 65 at a rate of 10,000 a day — a trend that will last for the next 19 years.
  • An estimated 9 million of America’s 15 million business owners were born in or before 1964.

As you can see, the numbers are amazing. What concerns us though, is that most baby boomer business owners do not have an exit plan in place. According to a 2008 study conducted by Atlanta-based White Horse Advisors and Vistage International, 96 percent of boomer business owners agreed that having an exit strategy was important — but 87 percent did not have a written plan.

exit-planning-basicsThe ramifications of this two-pronged crisis could be catastrophic to middle-market baby boomer business owners. Simply put, you have a limited window of time before the sheer number of companies hitting the market potentially overwhelms the buyer community.  And based on the laws of supply and demand, when supply outpaces demand, prices drop.  Added to this, if you don’t have an exit plan in place now, you probably have no idea of when you want to exit your company – nor do you have any idea how much money you will need from the sale of your company to retire comfortably.

To learn more about exit planning, click here to download a free whitepaper that explains the basics.

© 2011 Generational Equity, LLC All Rights Reserved

About Carl Doerksen

Carl Doerksen is the Director of Corporate Development at Generational Equity.

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  1. [...] the exit. There are predictions that this will put a damper on small-business valuations, as the supply of businesses will outweigh demand. Whether or not you sell in 2012, you should start planning now [...]

  2. [...] the exit. There are predictions that this will put a damper on small-business valuations, as the supply of businesses will outweigh demand. Whether or not you sell in 2012, you should start planning now [...]

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