Banking & Finance and Economic Development

Seller’s market should hold strong through rest of the year

West Michigan’s ‘values’ are prevalent when businesses change hands.

April 8, 2016
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Rua Associates M&A
Rua Associates, which is located in Zeeland, says a typical sale takes six to nine months to finalize. Courtesy Rua Associates

It was a seller’s market for companies looking to be acquired in 2015, and that trend doesn’t look to change in the next few years.

In fact, as Travis Ernst, Rua Associates business development and transaction manager, remarked, last year might not have yielded as many transactions for the firm, but the valuation of those deals was higher than in years past.

“The market does seem to fluctuate a little bit, but buyers are getting to the point of going to make these deals,” Ernst said. “There’s such a demand for businesses, and there’s the upturn of the economy so businesses have more capital to spend when they’re looking to grow through acquisition.”

In addition to businesses buying other businesses, Ernst noted in West Michigan there also have been increased numbers of individual buyers making these acquisitions. People who may be getting out of their corporate jobs with a desire to go into work for themselves, or even executives who have been downsized and are looking to use their settlement to start fresh, have been diving into the acquisitions market, as well.

In West Michigan, those deals reflect a tinge of the community values prevalent in the region. Ernst said there’s been a common theme of buyers looking to give back to the community, rather than just looking to flip the business and make a quick buck.

“I think that’s more of a West Michigan theme, where they think about how they can give back and they want to grow a company and help contribute to the community,” Ernst said. “So we try to find the right buyer — not just any buyer — because we try to think about the effect the transaction will have on West Michigan.”

Scott Jousma, who works in Rua Associates’ sales and marketing development sector, added it’s common for Rua to broker a deal in which the seller agrees to take less money to sell to someone who will keep the business in the area and work in the best interests of the region.

“We’re about matching up the right values and right people and making sure it fits,” Jousma said. “And this area has a good culture for it because people realize it’s not always the dollar that’s important, it’s the afterwards.”

It can be difficult, Jousma said, to find that right match, but when it’s all said and done, Rua tries to make deals that best suit the needs of both parties.

A typical sale takes about six to nine months to finalize, but each transaction is different. Some can take much less than six months to complete while others, like a business in a niche industry or a smaller market, can take a little longer.

Ernst said one of the challenges facing Rua in a seller’s market like this is getting the word out to interested buyers that there are some businesses looking to sell but maybe not aggressively.

“Now is a very good time to look at making a transaction because there’s a lot of passive sellers out there,” Ernst said. “But it’s an indication process of letting businesses know there are also buyers out there, and it’s better to start planning for that process now.

“Being a passive seller is OK, but knowing businesses are open to buying is important too. Now is the time to sell, when valuations are trending upward. And it should continue to go up for a couple years, but it won’t last forever.”

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