ABC Business Sales has just released its seventh Market Intelligence Report since October 2020, containing data up to September.
It shows the average business price continued to increase in this period at a moderate rate of 5 per cent, down from 8 per cent in the previous quarter ending June 2022.
ABC says increasing interest rates and more evenly matched demand and supply characteristics are the key factors contributing to prices achieving only moderate growth.
However, in the current economic environment, growth for privately owned business assets shows them to be a superior investment result compared to all other asset classes, including property and publicly listed shares, which have declined over the past year.
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“At ABC we are seeing business sales replicate trends we are witnessing across all other asset classes — that is, investors are becoming more diligent based on more uncertainties in the current economic environment.
“The business sales market is no longer experiencing the trend of demand exceeding supply and we are now in a more balanced market where both buyers and sellers have time to make sensible investment and exit decisions.”
ABC’s data indicates the market is experiencing a more normalised level of activity but is not undergoing the levels of activity seen 2021, a record year for mergers and acquisitions in New Zealand across all levels from publicly listed companies to SME business sales.
Completed business sales volumes for the 12 months to September were down 14 per cent compared to Sept 2021 and 26 per cent ahead of June 2020.
The company says there’s no doubt we were in a seller’s market in 2021, with historical data confirming demand factors were exceeding supply.
Demand levels have declined and normalised and this has contributed to total business sales reducing from 459 (September 2021) to 396 for the year to September 2022.
Overall, the average price for SME businesses (up to $5 million), excluding hospitality, increased by 5 per cent for the year to September 2022.
The increase is down from the previous quarter’s 8 per cent. However, ABC believes the current market is more balanced between supply and demand with 5 per cent being a sustainable rate and in line with the current inflation rate.
The average price for hospitality businesses (up to $5 million) has seen a 4 per cent increase for the 12 months to September 2022 and 29 per cent compared to September 2020.
Covid-19 lockdown effects formed part of the 2020 and 2021 numbers, and the bounce-back is a result of prices coming off a very low base.
ABC says the September 2022 average prices are more reflective of a normal market “and we trust these prices will be sustained going forward.”
Managing director Chris Small says, “The key takeaway for business owners thinking of exiting their business in the next 12 months is that we are no longer in a market biased towards sellers. Optimising a sale process will require more skill and expertise than ever before.”
Contact: Chris Small, ph 0800 180 222, email [email protected]
— Article supplied by ABC
