|
|
| Story
placed by Walker Sands Communications
for client BizBuySell.com Interested in buying or selling a business? Visit BizBuySell.com. Need a marketing firm that can take you to the next level? Try Walker Sands. |
||
 Larger Companies Go Up for Sale, Followed by Higher Prices |
||
| Patty Tascarella Pittsburgh Business Times January 11, 2008 Summary: Need help with PR? If you are looking for a great PR firm, you've found one. Walker Sands is a leading Chicago PR firm with a strong track record that makes it one of top national PR agencies.. Bigger businesses are hitting the sale block in Pittsburgh, and they're fetching a higher price, according to an online marketplace. (article continues below useful links)
BizBuySell.com, which handles mostly small business transactions, said the median asking price for a Pittsburgh-area business during the final three months of 2007 was $283,034, based on 112 companies listed on its Web site during the three-month period ended Sept. 30. During the quarter, five deals closed, representing a range of industry sectors, though BizBuySell would not name the companies. Of those five deals, median annual revenue was $850,000, and median sale price was $800,000, slightly below their median asking price. Those local fourth-quarter numbers were above Pittsburgh's third-quarter average price of $275,534 and ahead of the national fourth-quarter average of $255,000. BizBuySell General Manager Mike Handelsman said business valuations in Pittsburgh are higher than what he's seeing nationally. BizBuySell only began breaking out regional data in mid-2007, he said, so comparative data were limited. National City Business Credit Managing Director Greg Steve doesn't believe BizBuySell's fourth-quarter increase signals a trend that prices are increasing. "Unless," he said, "it's just the competitive landscape, and people are focusing more on smaller deals so they get bid up a little bit. But I think banks and mezzanine lenders are looking at the world as they always have." But Grant Street Business Advisors President Kathy Hanula said local buyers are more interested in smaller companies than they were in the past -- particularly those looking to expand their existing business through acquisition. "That's been an approach used for larger companies, but smaller business owners are becoming educated, and I'm getting more of these inquiries," Hanula said. BizBuySell's figure is "in the ballpark" for very small business sales, she said. Although her Downtown-based firm serves as a broker for companies with sales ranging from $5 million to $20 million, Hanula said a notable trend of buyers in 2007 was an increasing interest in companies with sales of less than $10 million. Allied Business Consultants President Tony McDaniel said he "wouldn't argue" with BizBuySell's numbers, although his Franklin Park-based brokerage specializes in transactions up to $20 million. His firm saw more deals last year than in 2006 and expects activity to increase this year. "There's an increase in businesses going up for sale because baby boomers are retiring," McDaniel said. "It's estimated (nationally) that 70 percent of all closely held companies will change hands over the next 10 years."Mel Pirchesky, CEO of Oakland-based private equity firm Eagle Ventures, said buyers are more sophisticated about potential monetary gains from buying small companies. "More people are realizing you can make money in private equity," Pirchesky said. "You make more money from the bigger deals, but you can still come out on top with small ones. There are so many groups chasing deals now that people who never looked at anything less than $5 million are looking to $1 million, or $500,000 or $283,034." Pirchesky said Pittsburghers are more willing to "go where there aren't a lot of people fishing, because if you pay too much, you won't make money, no matter what you do." Though he mostly buys medical device companies and manufacturers, Pirchesky has seen increased interest by local investors in distribution companies -- "especially ones that really provide a value-add," he said. Much of this is being fueled by big companies not wanting to deal with small customers, he said. Many dropped the wholesaler who served as middle man, figuring the Internet could fill the gap. "But the Internet doesn't always work, so the middle person, or distribution company, can still do well," Pirchesky said. "There's a need for distribution companies, and people are looking to buy them." Stephen Gurgovits Jr., CEO of Ross-based F.N.B. Capital Corp., the private equity arm of First National Bank of Pennsylvania, said while there's more value in smaller deals, "they're harder to get done." Smaller business owners tend to be less sophisticated about the process in terms of their financial reporting systems and the depth of their management teams, said Gurgovits, whose own sweet spot starts at $3 million. "That's usually because they can't afford the overhead," Gurgovits said. "So for a traditional financial buyer like a fund or a group like ours, it doesn't make sense to play for volume. It means you'll have to do more deals to get your capital to work. And there's more risk because, when the economy turns, they don't have the resources to withstand a downturn as well as a larger company." Copyright © 2008. Pittsburgh Business Times.
|
||