Skip to content

M&A Buyers Ramping Up Their Pace

Business Sales and M&A Specialists

Talk to anyone trying to buy a house right now and they’ll tell you competition is tight. In certain price ranges, buyers need to put an offer in fast (like the day it’s listed fast) and should expect stiff competition. According to data from Zillow, new for-sale listings are down about 25% over a year ago but house values are up 4.3% year-over-year. Elliott Pollack’s 8/17/2020 Monday Morning Quarterback report provided the following AZ Snapshot:

  • Home prices in Greater Phoenix rose 1.9% in the second quarter of 2020 and stood 10.2% above year earlier levels. That level of price increase indicates a significant supply/demand imbalance in the area.  In Greater Tucson, prices for the quarter rose 1.0% and stood 4.7% above year earlier levels.
  • According to the Tucson MLS, total listings fell to 1,301 in July.  This is down from 1,507 in June and 2,507 in July 2019.  At the same time, closed sales rose to 1,368 compared to 1,316 in June and 1,330 a year ago.  As a result, prices in July were up 8.5% from July 2019.

We may be seeing a similar phenomenon in the lower M&A. When we take a business to market, we typically field 35 qualified buyers (i.e., formal, vetted requests to sign a non-disclosure agreement) in about 60 days. However, when taking a recent business to market in Q2, there were 43 signed NDAs in just two and a half weeks! That’s unheard of. And it shows that there are plenty of buyers still looking.

In a recent M&A survey reported in Harvard Business Review, 51% of corporate development leaders reported a “temporary hold” on deal development until the nature of the economic recovery is clearer. Another 14% reported a full stop in activity. But 23% of buyers indicated either no plans to alter their current acquisition strategy or plans to accelerate deal volume through 2020.

We had been operating in a seller’s market for several years prior to the pandemic, meaning there were more buyers than sellers in the market. Buyer/Development teams worked hard to get out ahead of opportunities and find creative ways to meet their acquisition targets.

Now, we know that many of those teams have dropped out of the race. But so too have many sellers. Inventory (good businesses for sale) is down, so if you’re selling right now in certain sectors, you can get more attention to your deal.

It’s not the right time for everyone, but if you have a resilient business model and are ready, buyers are still looking. Show buyers a fast rebound and they’ll pay for your strong future – ignoring any temporary blips this spring.