BUYING SME BUSINESSES AFTER LOCKDOWN
Not many business purchases going through at the moment whilst we’re in lockdown, but there are signs of people planning for when we come out the other side.
Our focus is on SME’s and the hope is that what was a busy pipeline before lockdown will come bouncing back in a “V” shaped recovery.
Whilst we’re preparing for that there are some factors to take into account, which suggest that the bounce back may take a while.
Lifting of all lockdown restrictions will take a while, probably not until a vaccine has been discovered. In the meantime a phased lockdown will make it hard to assess underlying business fundamentals.
Also whilst surviving lockdown is key for businesses, it’s the next phase of managing cashflow as businesses emerge from lockdown that is likely to see just as many casualties.
Whilst some sectors that have been key to keeping us going through lockdown are booming, there are plenty that are not.
If you’re looking at a sector such as delivery firms, pharmacies or food retailers who are struggling to cope with the demands placed on them currently you need to factor in how much of this growth is temporary.
In other sectors where businesses are closed, or severely restricted, is the fall off in turnover temporary or will the recovery take a while? Or will be see some changes in behaviour after lockdown as people get used to a new normal.
If you’re still mulling over the impact of the business performance issues and trying to work out if they are short term, medium term or long term, you can imagine this is also exercising the banking sector.
Not only is lending likely to be impacted by the focus of the banks on lockdown related government schemes but the banks’ valuers will want to review business performance rather than assume pre-lockdown turnover and profits will return.
WHAT YOU CAN DO
You can speed things up:
- Request up to date management accounts from the seller.
- Work out cashflow requirements.
- Make sure your bank understands your plans.
- Be brave there will be bargains out there for those with the vision to spot them.
If you are consider selling or buying a business, please feel free to call me, Jas Singh, for free telephone advice 07768110434.