Timing is Everything – Is Now a Good Time to Sell Your Private Company?

By Anthony Tolomizenko, BSc, CPA, MBA

Today’s economic environment presents an opportune time for business owners looking to sell their companies.  The first reason for this is that buyers are currently paying good premiums for private business.  It’s a matter of supply and demand.  There are not many private companies currently on the market, and this is driving prices up.  In addition, buyers – particularly financial ones – are sitting on an estimated $2.8 trillion of cash looking for attractive investments.  These two factors are fueling increases in 2021 private company prices.   

There is also the risk that the economic recovery with its low interest rates and record prices (stocks, real estate, etc.) may be susceptible to a price correction.   Public and private company multiples are high due to optimism for the efficacy of our global vaccination programs as they relate to the COVID pandemic.  As of April 29, 2021, 30% of the US population has been fully vaccinated and in the UK 20% of the population has been vaccinated.  Thankfully, the number of reported new cases in these two countries is down 82% and 95% respectively from peak levels in January.       

Having said that, the great unknown is whether the vaccine programs will be effective against the new variants of COVID-19.  Data from clinical studies is still sparse in this area.  Should it turn out that our vaccines are not as effective against emerging variants as hoped, world economies will fall into a second COVID-related recession. 

Today’s valuations are priced to reflect the efficacy of our global vaccination programs and do not adequately reflect the risk associated with the failure of these programs.  (Let’s keep our fingers crossed that everything goes according to plan.)

So is it a good time to sell your company?  It absolutely is.   Valuations are high, market sentiment is positive not fully reflecting the downside risk of our vaccination programs, and well-funded buyers with eager appetites for well-run companies are plentiful.

Copyright 2021