Business Sale Prices Falling

Hi Everyone,

My posts have been infrequent – but WOW they’re good when they do come.

As I have been telling my clients for some time now, businesses values are going to decline as more baby
boomer business owners go to the market. This has been backed up by a recent article in BizExchange – here is an extract – for the full story go to www.bizexchange.com.au

A national business index, which monitors the value of private businesses, reveals that even before the impact of the US sub-prime fallout had reached Australia the value of privately owned Australian businesses was sinking.

The BizExchange Index, which covers the last quarter to Dec 07, says this trend is likely to accelerate in the wake of the tightening of credit flowing from the US sub-prime crisis and particularly if economic growth in Australia slows as a result.

The underlying driver in the Australian market is demographic change as more business owners approach retirement. This is increasing the volume of businesses for sale and decreasing prices as supply outstrips demand. The availability of funding, or lack of it, for potential Gen X or Y buyers is another factor to be considered.

Key findings included that the market is developing a definite pattern of listing volumes increasing (up 25% on last quarter) while prices are falling (down 5% on last quarter). This follows several quarters of fluctuations around a declining trend. The volume of businesses being advertised for sale continues to grow, up 25% on the previous Quarter (to Sept 07), and 46% on the same time last year. The majority of this growth in listings has been online The average price, expressed as a multiple of earnings, has dropped slightly this Quarter, and is also below the same time last year.

For further information please go to www.bizexchange.com.au