Winning Strategies: Why NOW Might Be the Best Time to Sell

Most of my consulting time is spent with companies either buying or selling. An amazing percentage of printers today are looking to grow by acquisition. Whenever we market a business for sale, we get over 100 responses. For most, the current business for sale is not a fit but all are looking for an opportunity to grow their revenue through a strategic acquisition. 

What is different today versus the past few years is that most sellers are relatively healthy businesses. Why? I believe that most but not all distressed or highly distressed printing businesses were either tucked-in to other printers, went bankrupt or simply closed their doors during the recession. 

Other important trends that are driving today’s M&A marketplace are:

• The switch away from offset to digital and/or inkjet printing is accelerating, which leaves many small or medium commercial printers faced with having to phase out their offset equipment and invest in digital and inkjet equipment. Many just don’t want to make that jump and spend the money if they are looking to exit in the next few years.
• Many printers do not want to reinvest in new equipment as this is driven by the mistaken idea that adding debt is bad if you try to sell. The fallacy is that many buyers actually look for sellers who have equipment they don’t have.
• Also, many of the printers who survived the recession are now five years older and are looking to retire. There are a tremendous amount of printing companies who started up the 1970s or '80s and now the owners are looking to exit.
• The next generation is not highly interested in a career in the printing industry -- or in taking over the family business. At the same time, many print owners want their children to pursue another career due to the challenges they have worked through in the past decade.
• Internal buyouts by an employee or group of employees are rare today as most print owners want or expect to be paid a good chunk in cash when they sell. Inside deals are hard to finance through traditional banks or even SBA-backed loans unless the buyer(s) have other collateral. Few owners want to finance a sale with little or no cash down, particularly if they feel the future is uncertain.
• “Reverse” tuck-ins are more common, and I have been involved in several recently. A “reverse” tuck-in is where a smaller printer who needs more space buys a larger printer and moves into their building. Most are digital or quick printers who are growing and buying a local commercial printer who has seen their sales fall and have excess capacity. In most of these deals, the buyer also purchased the property.
• The leaders in the industry came through the recession without incurring more debt and have built cash reserves that they can use to acquire a company, plus they are more profitable since their organic sales are now growing.

So faced with our current M&A environment, why is NOW a good time to sell? 

1. There are many more buyers than sellers. Simply, supply is less than demand, which means sellers will potentially get more for their business than a few years ago. I am seeing multiples (of EBITDA) paid increase. In most deals that I have been involved with, the sellers have had multiple offers.
2. The commercial real estate market is stronger today, which allows the seller to feel confident that they can sell or lease out their property. Most buyers do not want an additional location and just want to tuck-in another business into theirs.
3. Used equipment is easier to sell, albeit prices are not rising. Online auctions, eBay, Craigslist, and equipment brokers allow a seller several options to sell their equipment that a buyer does not want or need. Most of the equipment is going overseas to India, China, and South America, where the printing industries are still growing. The world economy appears to be slowing, which may affect the used-equipment market.
4. If sales are not growing or declining, waiting to sell will mean getting even less value for your business. Faced with technology changing rapidly, equipment aging, and not having the resources or ability to market the business properly will result in continued declines in sales and profits. I have been involved with several businesses recently where the owners have to put their own money back in the business just to keep the doors open.
5. Competition is increasing even though the total number of shops have declined. I see the larger shops gaining and growing at the expense of their smaller competitors. Internet printers and print brokers are stealing business away from local printers.
6. The economy is going relatively well, but when will it end? Most printers are seeing small increases in sales with existing clients -- although we all know what happened during the last recession. 

The old adage is “sell high” or simply sell when the value will be the highest in the foreseeable future. If you can’t see your business value increasing or are just not willing to risk more money in your business, NOW may just be that time to sell. Next month, I will tell you how to prepare your business for sale.