Private business values may have bottomed

Submitted 18/05/2009

My-business e news

 

The March 2009 BizExchange Index results suggest that the fall in the value of private businesses may have bottomed.

The key findings of the latest index were:

  • Dramatic drop in the number of listings - down about 33%.
  • The trickle of new listings dominated by sales advertised by receivers/administrators.
  • Refusal by business owners to sell at anything lower than current prices has effectively put a floor in private business prices for the time being.
  • The number of businesses listed for sale with a turnover of greater than $5 million has decreased dramatically in the last two quarters.

Commenting on the results, David Bird, Chairman of BizExchange said prices simply are now more realistic and reflect expectation of future profit performance.

He noted that there had been a slight improvement in market sentiment with more people predicting pricing to continue at current levels. However net sentiment was still predominantly negative with more people predicting prices will fall than those predicting prices will rise.

From March 2007 to September 2008 business values in many sectors almost halved due to an increased supply of new listings combined with worsening business conditions.

The last 6 months have seen a reduction in the number of listings and relatively stable values.

It now appears that there may be a floor in business values which will prevent them falling much further. Going forward Mr Bird said that business values were unlikely to increase dramatically because the volume of businesses for sale is expected to increase as the number of baby boomers entering retirement increases.