BizExchange is pleased to assist all media enquiries in relation to Australia's private business market. In particular, this section of the site is designed for journalists wanting a ready snapshot of BizExchange and Australia's private equity market. It includes press releases, overview of key issues as well as other media related resources.
Latest Press Release
Values of Businesses continue to decrease
as uncertainty about the future increases
A continuing decline in business values and increasing uncertainty about the future direction of values are key findings in the latest BizExchange Index which monitors the value of private businesses in Australia.
The Index, which covers the March 08 Quarter, reveals the decline in values is particularly apparent for smaller businesses where the volume of businesses listed for sale has increased markedly. Recent credit tightening can be expected to increase the number of stressed sales.
Key Findings of the Index are:
- The market is developing a definite pattern revealing an increase in listing volumes and a fall in prices.
Values: -14% quarterly change, -23% annual change
Volumes: +10% quarterly change,+178% annual change
- The majority of the growth in the number of businesses for sale is at the smaller end of the market. The number of businesses for sale in the middle market ($5 million plus) has declined in recent months.
- The valuation of small businesses varies widely by industry and also in the range of values.
- The overall market trend of declining values continues with reductions in values across all industries and business sizes.
- The market continues to be spread on expected values, with an increasing number of people uncertain about the future direction of business values.
- The value of businesses continues to be aligned with turnover across all industry sectors, although the relative value of businesses with a turnover of half to one million dollars has declined.
- The number of businesses advertised for sale for less than a year’s earnings continues to grow, representing nearly 10% of all listings for which the data was available. This is up from less than 1% fifteen months ago.
BizExchange has been monitoring Australian Private Business Values since March 2006, and publishing the BizExchange Index since September 2006.
Commenting on the Index, David Bird, Chairman of BizExchange said,
“Downward pressure on private business values is expected to increase in the coming months as recent credit tightening impacts on the revenues of many small businesses. A high proportion of these are involved in retailing and hospitality where discretionary spending is an important element.
“Credit tightening will also restrict the capability of potential buyers, particularly first-time business buyers drawn from the Gen X and Gen Y demographics.
“The more restricted access to funding in the current market will also have a downward impact.
“As always, uncertainty as to the future is a negative factor for business values. Recent financial market failures in Australia and the USA have materially raised the level of uncertainty”.
The BizExchange Index is developed in conjunction with IBIS World and with the support of CPA Australia. It is designed to help business owners determine the value of the businesses in the sector in which they operate. It draws its information from monitoring data on businesses for sale as well as surveying business advisors including many accountants across the country.
Over the next ten years it is estimated that over 400,000 privately owned businesses with a value estimated at $1.6 trillion will be up for sale (RMIT/Boyd Partners Study 2003).
About BizExchange
BizExchange is an online marketplace for business sellers, investors, purchasers and their advisors. Businesses can be listed for sale or investment on a confidential basis. The company was established in 2005 and became operational in August 2006. BizExchange can reach a larger pool of purchasers or investors cost effectively wherever they are in Australia or overseas.
The company derives its revenue from listing fees. It is not a broker and does not take commissions. It has individual businesses listed as well as businesses listed through professional firms such as accountants, business advisors and business brokers.
For further details on listing costs and for further information please go to www.bizexchange.com.au
Released by: For further information:
BizExchange Pty Ltd David Bird
350 Collins Street Chairman
Melbourne Tel: 03 9606 0055
Tel: 03 9606 0055 Mob: 0419 380 453
Recent Media Coverage
Claire Heaney, Herald Sun, Thursday February 7, 2008
Exit plans up in air as credit crunch deters would-be buyers
In it for the long haul
Business owners looking to bail out face a shrinking demand for their businesses.
A combination of oversupply and a shortage of credit for potential buyers, accentuated by the enduring sub-prime fallout, are disrupting exit strategies.
The latest BizExchange Index revealed that the number of businesses on the market was up 25 percent on the previous quarter ad sale prices were down 5 per cent.
BizExchange chairman David Bird said the results from the December quarter indicated “softer” prices.
“It is looking a bit softer at the moment… it might be an oversupply rather than a shortage of buyers and buyers might be waiting and seeing” he said.
According to BizExchange, the drop in business values and jump in listings was bigger at the smaller end of the market.
“It is not unusual for businesses with a turnover of less than $500,000 to be selling for values that represent less than their annual earnings” he said.
Mr Bird said if the economy took a downturn and larger companies cut staff some of those would seek to get into business using their payouts.
He said people would “buy themselves a job”.
The December quarter results showed a reduction in the number of hospitality businesses for sale.
The accompanying report said however, that “these industries will continue to be over-represented because these industries have traditionally had high churn rates with some businesses changing several times in a decade”.
Mr Bird said sometimes people went into cafes and restaurants with “rose-coloured glasses”.
“They are harder businesses with long hours, long weeks and they stay for a shorter time” he said.
Mr Bird said often people did not appreciate the hard work associated with hospitality businesses.
He also said that in a “climate of oversupply it was important that business owners p;ut the time and effort into getting their business in good shape.
“My advice is to make sure you have planned it (any sale) as thoroughly as possible”, he said.
He said it was also important for vendors to be realistic about the return from their business.
He said with 16 years of economic prosperity vendors had to be careful that their expectations of sale prices were not too high.
Mr Bird said it was also a good time for those in the market for a business to start looking.
“They should take time to research, it is a good time to start looking because values are going to be a bit soft”, he said.
But he said the economic climate would see tighter lending criteria.
“This was bad news for under-funded Generation X and Y’s who would struggle to get a foot in the door.
“The underlying driver in the Australian market is demographic change as more business owners approach retirement”, he said.
“This is increasing the4 volume of businesses for sale and decreasing prices as supply outstrips demand”.
In a glance:
A trend of higher volumes and lower prices has emerged.
The volume of businesses on the market is growing, up 46 per cent on the same time last year.
There has been a real shift to listing businesses for sale on line.
Increased listing volumes may be attributable to businesses listing in a number of categories, reflecting that they are struggling to get buyers.
The average price, traditionally expressed as a multiple of earnings, is down slightly on the previous quarter.
The rule that the bigger the business the higher the earnings multiple is backed up by the Index. Smaller businesses keen to prosper could look to merging with other businesses.
BizExchange was launched nearly two years ago and monitors private business values.
January 31, 2008: December 2007 BizExchange Index - click here
Key observations for the quarter ended December 2007 are:
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The market is developing a definite pattern of listing volumes increasing (up 25% on last quarter) while prices are falling (down 5% on last quarter). This follows several quarters of fluctuations around a declining trend.
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The volume of businesses being advertised for sale continues to grow, up 25% on the previous Quarter (to Sept 07), and 46% on the same time last year. The majority of this growth in listings has been online.
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A possible explanation for the combination of increase in listing volume along with pricing stability may be the result of some individual business listings being advertised across both quarters. This is a further indication that some businesses are having difficulty selling at their desired price.
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The average price, expressed as a multiple of earnings, has dropped slightly this Quarter, and is also below the same time last year. This decline in prices and increase in volume is driven in part by the increasing number of baby boomers approaching retirement.
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The decline in business values and increase in listings volume is most notable at the smaller end. It is not unusual for businesses with a turnover of less than $500,000 to be selling for values that represent less than their annual earnings.
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The variance in values continues to contract. While there are still some very wide ranges in some segments of the market (e.g. small property and business services businesses) valuation extremes in the market are increasingly unusual.
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The general rule of thumb that the larger the business, the higher the earnings multiple, is well supported by the data. This continues to provide opportunities to consolidate a number of smaller businesses to increase the earnings multiple - which is one of the reasons the private equity firms continue to participate in this market.
A copy of the most recent BizExchange Index is available by subscribing to BizExchange
October 19, 2007: October 2007 BizExchange Index - click here
Key observations for the quarter ended September 2007 are:
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The volume of businesses being advertised for sale continues to grow, up 12% on the previous Quarter, and 38% on the same time last year. The majority of this growth in listings has been online.
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The average price, expressed as a multiple of earnings, has lifted this Quarter, although it is still 25% below the same time last year. The long term decline in prices and increase in volume is driven by the increasing number of baby boomers approaching retirement, while the larger drop in prices during the June Quarter was a result of a temporary rush triggered by the June 30 deadline of the Superannuation contribution ruling.
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The decline in business values is most notable at the smaller end where businesses for sale at earnings multiples of less than one are now part of the business landscape.
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The variance in values continues to contract. While there are still some very wide ranges in some segments of the market (e.g. small personal services businesses) valuation extremes in the market are increasingly unusual.
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The general rule of thumb that the larger the business, the higher the earnings multiple, is well supported by the data. This continues to provide opportunities to consolidate a number of smaller businesses to increase the earnings multiple - which is one of the reasons the private equity firms continue to participate in this market.
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There is increasing consistency in the presentation of financial figures for businesses for sale and much better quality in the presentation. However some inconsistency remains. For example, some businesses are presented with the owner's salary included in the earnings figures, distorting the earnings on these businesses. On the other hand some business assets are being sold as businesses with nil or negligible earnings – e.g. a truck being sold as a freight business. These have been excluded from the research numbers; however buyers should be aware of this type of behavior when considering businesses to acquire.
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The number of businesses on offer without real estate assets is also increasing (those with property assets are often offering the property as an option with the sale).
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The number of businesses with a turnover of less than $1Million represented approximately 80% of the market
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A copy of the most recent BizExchange Index is available by subscribing to BizExchange
August 2, 2007: June 2007 BizExchange Index - click here
Key observations for the quarter ended June 2007 are:
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There were over 10,000 businesses listed for sale in print and online recorded by the BizExchange Index in its latest report for the June 07 Quarter – an increase of over 25% on the previous March Quarter. The majority are small to medium in size consistent with the distribution of Australian businesses overall. The Index is released quarterly and monitors private business values.
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Retail and hospitality businesses are over represented in the market with retail businesses comprising 42% of print and online listings and accommodation, cafes and restaurants comprising 27% of print and online listings. Retail businesses represent 20% of all businesses in Australia while hospitality comprises just 3% (ABS Stats).
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After successive falls in values during the last two quarters business owners looking to sell will be pleased to know that prices have stabilised although business owners engaged in the hospitality and retail sectors are selling at the lower end – for less than a year's earnings in a number of cases.
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In this Survey, respondents, who are predominantly accountants, business brokers and business advisors, are spread in their expectations on business values for the next 12 months – 45% expected business values to remain the same, 26.5% expected them to fall, 22.5% expected them to rise, and 6% were unsure. By comparison, in the March Quarter the majority expected them to remain steady, while in the December Quarter most expected the values to fall.
April 21, 2007: March 2007 BizExchange Index - click here
January 31, 2007: December 2006 BizExchange Index - click here
October 26, 2006: Launch of BizExchange Index - click here
Release covers launch of inaugural index including background material and key findings.
Other Resources
Photos
Images availabe for use by Media in combination with Media Release and Interviews. click here
Most Recent BizExchange Index
Copy of the most recent BizExchange Index is available by subscribing to BizExchange or by contacting the BizExchange Communication Advisor Michael Potter on 03 9617 3700 .
Industry Background
Information on the number and size of privately owned businesses in Australia including analysis by industry. Click Here