Posted: 29 Jan. 2021

Why this could be a great year to buy or sell a SME business

With 2020 firmly in the rear view mirror and summer days spent lazing at the beach coming to an end, now is the perfect time to start thinking about what 2021 might mean for you and your business and whether growth by acquisition, a financial acquisition, or a full or partial exit should form part of your 2021 business planning.

It’s no great revelation now that 2020 was a year of unprecedented turbulence and driven by COVID-19 threw the kitchen sink of challenges at businesses. The unwavering resilience shown by businesses in the face of never-ending challenges and strategic adaptability that was so quickly implemented by so many, were real highlights of getting to work closely with a wide range of businesses throughout 2020. Reflecting on the year that was, one of the initial surprises and ultimately key highlights for me was the volume of merger and acquisition (M&A) activity that continued through all this disruption, despite some reservations that activity levels may have subdued for a period. This activity was driven by some key fundamentals:

  • Genuine sellers – the key factor for selling a SME (small and medium enterprises) business is often driven by the “age and stage” of either the business or the owners. These “age and stage” factors are more driven by internal than external events and so genuine sellers were still plenty in 2020. On top of this, the disruptive events of 2020 led business owners to reflect on their futures and this led some to decide to prepare for an exit. Essentially 2020 created a larger pool of business sellers than in the preceding years.   
  • Active buyers – again the key factors for acquiring a business (such as inorganic growth or looking for a financial return) still held true in 2020. Whilst there were some changes in the mix of the “hot” or “not” industries, investors looking to place capital were still easily found. We also saw an increase in businesses with strong balance sheets look to undertake acquisitions to diversify their core business away from areas that had been adversely impacted by COVID-19.  
  • Access to (cheap) capital – historically low interest rates have continued to drive investors to look for places to invest capital outside of traditional savings vehicles. We continued to see an increase in the number of smaller family office/private equity investor groups looking to invest into the SME market. Access to cheap capital further grew the number of active buyers in the market.

All these key fundamentals that we witnessed in 2020 still hold true in 2021. We expect that M&A activity will continue to be strong and that 2021 will be an attractive market for either undertaking an acquisition or exiting your business.

The key to any successful transaction is planning and preparation. The Deloitte Private team work closely with a wide range of businesses throughout the transaction life-cycle to support them either undertake acquisitions or exit their own business. We have developed strategic workshops to help businesses identify and validate potential acquisition targets and the potential impacts on their business, and workshops to help businesses assess their exit readiness and undertake planning for a potential exit.

To find out more, get in touch

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Thomas Watson

Thomas Watson

Director - Corporate Finance

As a Director in the Deloitte Corporate Finance Mergers & Acquisitions team based in Auckland, I focus on advising clients through the transaction life-cycle. From business readiness to post completion, I work alongside vendors and purchasers to ensure a smooth transaction with a focus on reducing execution risk and maximising value. I also work with a wide range of mid-market clients providing strategic advice and support in areas including strategy, financial modelling and commercial validation. I am passionate about seeing businesses transform commercial ideas into financial results.