Keep calm and cool when selling in hot market | Crain's Detroit Business

October 11, 2015 8:00 a.m. UPDATED A DAY AGO 

For entrepreneurs to sell their companies is no light matter. Like watching a teenager head off to college, letting go of a company built from scratch is an experience filled with mixed emotions and concerns. This is an experience many owners are doubtless feeling pressure to engage in. That's because valuations are high right now — really high.

"In my 16 years of doing M&A, valuations are as high as I've seen them," said Peter Roth, transactions attorney and partner at Varnum LLP. "You have a lot of private equity money chasing deals, and banks are being loose in lending money. Businesses are trading or selling at high single-digit multiples. ... If selling the business is something that is in your future, now is about the best time to do it."

Aggressive lending is allowing entrepreneurs to get "more favorable terms, creative financing and financing based on cash flow rather than hard assets," said Rajesh Kothari, founder and managing director at Cascade Partners LLC in Southfield.

Middle-market deals increased 16 percent in the first half of this year compared with the first half of last year, according to a market update from Birmingham-based Quarton Partners. Financial and strategic buyers both have surpluses of capital to spend, making the middle market "highly attractive for sellers," the report said.

That's especially true for companies with a secret sauce. Those with a proprietary, differentiated product or service "are garnering record valuations in today's marketplace," according to the report.
That would fit the description of this month's featured company, Garden Fresh Gourmet, the maker of Garden Fresh Salsa.

While business owners might understandably feel tempted to surrender their cherished companies to this frothy market, they should resist the urge to rush the process for fear the market will change.
Because, as Garden Fresh co-founder Jack Aronson and others explained, time was the factor that mattered most in making them feel good about having sold their companies. They spent the time to find the right buyer that served not just their financial needs — but also those of the company and its employees whom they worked so hard to develop.

And for those concerned they might miss the boat, Roth said that while high valuations won't last forever, he does believe they will remain high into early 2016.

"If you're thinking about selling, start the process now to maximize your value. It's not an overnight process. It could take four to eight months," he said.

At any rate, premature sales are never a good idea.

"If you're not ready, you shouldn't sell your business just because valuations are high," Roth said.

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For additional information regarding Florida business sales, acquisitions and valuations, please contact Eric J. Gall at Eric@EdisonAvenue.com or 239.738.6227. Also, visit our Edison Avenue website at www.EdisonAvenue.com or my personal website at www.BuySellFLbiz.com.