According to the 2023 National State of Owner Readiness Report from the Exit Planning Institute, 77% of Baby Boomer business owners intend to exit their businesses within the next decade—with 57% planning to do so in the next five years. We are seeing a continuing flow of baby boomer business owners selling their businesses because the time to retire has arrived for many of them. This pent up demand is visually represented in the graph below with persons born in 1959 turning 65 this year.
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Figure: U.S. Births from 1940-1980 with Baby Boomer births by year highlighted in red. This graph from Bertram Michel of M/Cap Advisors illustrates the potential impact of Baby Boomer retirements on M&A activity.
With the current economic landscape marked by inflation and shifting interest rates, the M&A market is facing its own set of challenges. Addison Adams shed light on this issue during a recent episode of the Guts and Glory Podcast hosted by Luis Scott, pointing out that recessionary pressures and rising interest rates can dampen deal-making activity, while making borrowing costs more expensive. These conditions affect the purchasing power and valuations of buyers who rely on leveraged financing. However, not all buyers use debt to finance business acquisitions. We are seeing a number of large companies picking up smaller businesses for all cash. Despite the current interest rates and mixed signals in the economy, the potential for future economic recovery and the Baby Boomers ready to retire creates pent-up demand, signaling that now remains an excellent time to consider selling your business.
The Fusion of Old and New
Aspiring entrepreneurs and investors are presented with the unique chance to blend the credibility and stability of established brands with fresh, forward-thinking strategies. Often, retiring Baby Boomers contribute more than just their business—they offer mentorship, advice, and the potential for continued expertise in a consultancy role, passing down industry knowledge. This intergenerational exchange is incredibly beneficial, ensuring that while the businesses may change hands, the legacy and foundational principles continue to thrive under new leadership.
In the discussion with Luis Scott, Addison Adams offers practical advice for those poised to take the helm or pass the torch. Addison's expertise is particularly valuable for owners ready to prepare their businesses for sale and for entrepreneurs eager to steer these established enterprises toward new horizons.
Get a glimpse of their insightful exchange in this highlight from the show:
In addition to discussing the broader market dynamics, Addison Adams also outlined pivotal steps for Baby Boomer business owners gearing up for a transition. From conducting thorough due diligence to ensure a solid foundation for negotiations, to enhancing business value through strategic improvements, Adams underscores the proactive measures that can significantly influence a business's appeal to prospective buyers. Detailed planning and preparation are also highlighted in navigating the complexities of M&A transactions, particularly in a fluctuating economic climate.
Embark on Your Next Business Chapter with Confidence
When the time comes to chart a new course for your business, whether through sale or acquisition, having seasoned counsel can make all the difference. Contact Adams Corporate Law at (714) 619-9360. Our team is ready to provide the personalized guidance and expertise needed to navigate your M&A deal with confidence and achieve a successful transition.
For additional insights on preparing for a business sale and understanding the vital role of brokers, investment bankers, and M&A attorneys, we invite you to read further: