I frequently encounter small business owners who tell me that they plan ontheir business when the “time is right.” When I ask them when that will be, they invariably indicate that the right time to enter the process will be at the peak of the next M&A cycle. When asked about how they will know when the peak has arrived, I usually get blank stares or they say they will hear about it in the media or better yet, from their Uncle Larry, the part-time business broker-pool man.
The fact is no one can accurately predict the peak of the next M&A cycle. We are really good at predicting two things: when the cycle has turned up (which it did starting mid-2010) and when we are past the peak and the market is declining (hopefully that won’t be for awhile). History tells us that the optimal time to find a premium buyer for your business is at the beginning of the M&A recovery cycle. That is typically when buyers are most active and good deals are relatively scarce, which can contribute to favorable valuations. [Read more…]