A recession, job losses, and high immigration are driving a business sales boom. New Zealand’s biggest business broker reports an increase in buyer enquiries of more than 35 percent compared to previous years, and a significantly higher proportion of businesses coming to market, are selling.
Bruce Cattle, CEO of LINK International Group, says that despite the economic downturn, the data is reflecting increased buyer motivation and a smaller value gap between buyers and sellers.
“This trend reflects a proactive approach among people who see that their jobs aren’t that secure and need to take control of their destiny. People want more control over their income and more of it.”
Cattell says job uncertainty and high immigration contrasts sharply with the previous focus on labour shortages.
“Another reason for the increase is acquisitions. Last year, the primary concern of a business was acquiring staff. Now, the dynamic has shifted, allowing business owners to consider expansion through acquisitions,” he says.
Smaller, more labour-intensive businesses like cafés, lawnmowing, motels, and tourism businesses are doing well when it comes to buyer interest. Such businesses are popular because they’re like ‘buying an income’ for many.
“Buyer interest is not just among traditional Kiwi entrepreneurs but also new immigrants and those affected by job losses, particularly in smaller hospitality businesses. People want to create jobs through business ownership, often within family and community networks.”
He says that another contributor is that potential borrowers now perceive lower future risk and feel more confident because interest rates appear to have peaked.
For those considering this path, Cattell offers the following guidance:
- Assemble a skilled advisory team, including financial advice, an accountant, and a lawyer. Professional support is crucial for navigating the acquisition process.
- Ensure financial readiness by evaluating your budget and securing funding beforehand, just as you would if you were buying a home.
- Match your skills and experience with the business you intend to buy to mitigate risk and complexity to the likelihood of success.
Cattell says that while the market remains competitive, vendors have more options to provide finance to buyers, which helps bridge the gap between what the company is worth and what the buyer can afford.
“This adaptability is crucial for closing a business transaction and supporting economic resilience during uncertain times. For example, the vendor may allow the new owner to pay off part of the purchase price over 12 or 24 months or longer.
“Most Kiwis don’t want to build an empire. They want to move from earning, say, $100,000 a year to $200,000, and an opportunity to get the family involved.”
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