Baby boomers are retiring: M&A opportunities for entrepreneurs - Blog - Ki Solutions Financial Advisors

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Baby boomers are retiring: M&A opportunities for entrepreneurs

Published by in Buy-side M&A ·
Tags: Mergers & AcquisitionsBuy-side M&ARetirementExit PlanningBaby BoomersMillenials

Mergers & Acquisitions can be a great alternative path for entrepreneurs planning to start their own business. By taking over an existing business, they grow quickly and don’t have to start from scratch. In other words, entrepreneurs save time and resources they would otherwise have spent on, for example, building up a base of clients and suppliers. Making this an even more compelling approach, there is also the possibility of revamping an acquired business while keeping its proven concept and already-established client base. Now, more than ever, entrepreneurs should consider M&A strategies in anticipation of how demographics are expected to drive small-business M&A activity in the next couple of decades. The baby boomer generation of 76 mn people (born between 1946 and 1964) will be surpassed by the millennial generation as the U.S.’s largest living adult generation, expected as soon as 2019 according to the U.S. Census Bureau, and there could be US$ trillions worth of small-business assets for sale as many retiring business owners look to cash out.

With small-business M&A deals reaching record levels in 2018 and an increasing number of attractive businesses hitting the market, this an opportune moment for M&A deals that could create win-win opportunities for both sides. On the sell-side, many of the baby boomers, lacking financial security, are willing to go to great lengths to facilitate deals by providing services as consultants to make for a smooth transition following the sale of their businesses. This is especially critical to small businesses since they often are heavily reliant on their owners for success. Some can even provide seller financing. On the buy-side, entrepreneurs with an abundance of small-business financing options are willing to pay higher prices and multiples for good assets. Baby boomers can eventually engage in various types of deals, such as i.) transfer of businesses to their children; ii.) sale to employees (management buyouts); iii.) partial sale to new business partners (private placements); iv.) sale to other retiring baby boomers turned into second-act entrepreneurs; or v.) merger with another small business (merger of equals). Florida, known for its sizable community of retirees, offers plenty of potential baby boomer M&A targets.

There is much more to M&A than just calculating the value of hard assets listed on a target business’ balance sheet. For a good M&A deal, it is essential for entrepreneurs and small-business owners to find a business that matches their skill, experience, financial capability and personal goals. It is also equally important to acquire these assets at satisfactory terms. As M&A advisors, we track the best leads and improve our clients’ chances of finding attractive assets that fit their business strategy. With proper valuations, acquisition strategies, deal structuring and negotiation with sellers, we improve our clients’ chances of closing deals at satisfactory terms. Also, with our complimentary corporate finance advisory and capital raising services, we are capable of offering our clients end-to-end guidance, from a conceptual stage to post-acquisition, and also structure financed acquisitions.

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