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Marketplace twist: More business buyers than sellers
By Jim Kendall | Daily Herald Columnist
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Published: 8/12/2010 12:00 AM

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You'd think there would be no shortage of small- and mid-market businesses for sale. Apparently, you would be wrong.

"There are not enough good businesses for sale," says Linda Purcell, a business broker and president of Purcell Associates, LLC, Palatine. On the other hand, she says, "I've never seen so many well-funded buyers."

Many of those buyers "are willing to consider distressed situations and turnarounds."

Joe McCaul would like to see more salable businesses, too.

"Right now, it's a challenging time to find businesses that are good investments," he says. "If you have the ability to do a transaction, it's a buyer's market."

McCaul is president of Joseph Associates International, Inc., a business brokerage born in Naperville but now based in Chicago.

So where are the sellers of those privately held businesses that make up the small and mid-market marketplace?

"Some sellers say buyers won't buy," Purcell says, but the buyers-won't-buy mindset may not be accurate. "We're seeing more offers go to the closing table," Purcell says.

Other sellers, though, "want to wait and rebuild their sales and profits," Purcell says.

"People deferred a lot of those moves" during the worst of the recession, McCaul agrees. "Their businesses were unsalable, unprofitable. Now the economy has stabilized, but the problems didn't go away."

How long it takes to bring a business up to selling standards varies with the business. Balance sheets don't change overnight. Nonetheless, McCaul says, "Buyers need to replace lost income," and Purcell notes that many of the potential buyers she talks with "have substantial resources."

In addition, financing seems to be somewhat more available than it has been - although money isn't falling from the skies.

"Some bankers are coming through with conventional financing," says McCaul, who is quick to add that banks are "cherry picking (and) looking for loans with relatively minimal risk."

The fact that bank financing is available at all is an improvement.

"We face LaSalle Street," McCaul says. "I can go to the banks and take their temperatures."

Joseph Associates also has an additional deal-making tool: "We formed a capital corporation to help deals get closed," McCaul says.

Funds continue to be available through the SBA's 7(a) loan program, which caps out at $2 million, including a $1.5 million guarantee for the lending bank. SBA financing comes with rules, and not every lender participates. Ask Purcell or McCaul, or any other good business broker, for the SBA pros and cons.

Two thoughts: If you're a potential buyer, be aware that Schaumburg-headquartered Midwest Business Brokers and Intermediaries has focused its fall conference, next month in Des Plaines, on buyer issues. Contact Purcell.

On the other side, sellers should review the basics of a seven-step exit plan on the Joseph Associates' website, www.brokerchicago.

Questions, comments to Jim Kendall, JKendall@121MarketingResources.com.

© 2010 121 Marketing Resources, Inc.