Uncertainty fragments market

The private business market is difficult to read at the moment, and the looming election only adds to the uncertainty.

As the BizExchange team starts pulling together the sales data for the September quarter, there appear to be a number of factors at work in the market.

The volume of hospitality and retail businesses on the market remains high. Prices in this industry have always had a wide variant, but over the last 12 months the overall trend has been down, and this may continue.

There are a number of factors that could be affecting this. With many of these businesses relying on discretionary spending, they are often among the first to feel an economic downturn.

Also the commercial impact of the changes to smoking laws will be starting to show through in the hospitality industry – remember in the lead-up to the changes some of the larger operators were predicting up to 20% reduction in turnover.

In a very different sector of the market, the accounting services industry appears to be going through a minor restructure. It is certainly not the first time; the use of computers radically reshaped this industry in the 1980s and early 1990s, substantially reducing the reliance on compliance work.

In the last decade, the need for specialist skills across a range of services has led to the amalgamation of smaller firms into larger entities. This trend still underpins the market with the number of accounting firms looking to grow out numbering the number of firms looking to sell by three to one. While many firms are looking to grow through acquisition, any change to this sentiment will have a dramatic impact on prices.

Construction remains under-represented, particularly at the smaller end. This is possibly due to many tradespeople in the industry believing that they don’t have a business worth selling. However with their turnover at high levels and a new generation keen to be their own boss, there is plenty of room to negotiate a suitable work-out clause and have a better funded retirement.

With the possibility of interest rate increases, falling housing starts, and rising costs on the horizon now might be a good time to sell.

The IT industry is also starting to show signs of a demographic shift, with the possibility that a number of technicians-turned-owners, who have lived through several generations of technology change are now having second thoughts about doing it all again. One of the real challenges for them is proving that their business can work just as well without them.

Add into this mix the possibility of a change in government and the level of uncertainty edges up another notch. So will all of this lead to prices going up, down, or staying the same? Tell us your thoughts.

To read more Andrew Kent blogs, click here.