Happy New year to everybody! Hope the year turns out a little better than the weather we have been having here in Auckland. Bet a few people are going back to work frustrated that their annual holidays have passed without any sun.

Well the New Year brings new premises for Switch Business. We are now firmly ensconced in new digs at Level 4, 12 O’Connell Street. Hopefully we are a little easier to find now than in our previous location. For some reason people couldn’t find Chancery Lane, The Chancery no problem, but Chancery Lane impossible.

We tried to purchase the Chancery Lane office but the owner wasn’t keen to sell so after a little search we were to find this O’Connell street site. Paul did wonderfully well co-ordinating the design and fit out of our new offices, all was completed on budget and on time and here we are.

An interesting side note is that the reason the building was available was that there was a gym business already in place and interested parties couldn’t see past that. This was good for us because we are now gym owners as well. So should any of you live or work in the city and are looking for a gym stop by and have a look. The orange BalanceCBD sign out front will point you in our direction.

We were able to split off 100 square metres from the gym for Switch with a separate entrance.

While I have only been back a few days it certainly seems to me people are trying to make up for lost time after the being sidetracked during the September-December quarter with Rugby World Cup, the Election and then straight into Christmas. I have found that people are answering the phones, returning messages and coming in for appointments. This is not normal in our line of work, normally things don’t really return to normal until after Waitangi Day.

We are talking to numerous business owners at present and hope to have 4-5 new opportunities to go to market with over the next few weeks. Not too much of scale though with most of the opportunities we are seeing are under the $1m EV. As mentioned numerous times in my posts last year we are still looking for businesses with EBIT over the $1m on behalf of a number of parties.

With 2012 nearly upon us I think it is an opportunity to look back and analyse the good and bad of 2011. Was it really as bad as the media have portrayed?

The obvious highlight for all Kiwis was the winning of the Rugby World Cup. Most people I know weren’t that excited about it, it was more a sense of national relief. Funny how quickly after the event that the country just moved on and it was almost accepted as something that was expected. Happy for Graeme Henry because the furore that followed our early exit at the previous World Cup was over the top and he can now slide easily into retirement maybe sliding a sly middle finger to those in the South Island that wanted to support Australia because Robbie was the coach.

The election result was certainly a good result for business owners. Numerous business people I talked to commented that they would sell up and head to the western isle should Goff succeed in bringing his socialist policies to our fair shores.

For Switch Business it was definitely an up and down year which is to be expected I suppose because of the recession and taking into account the two major events mentioned in first two paragraphs. There were more peaks than valleys though because we achieved our budget for the year before the end of September but things certainly slowed after that. We had sales of $8.1m, $5.8m and $3.5m in the first 6 months of the year.

Our biggest issue this year has been finding quality businesses to market. There has been no shortage of enquiry from owners wanting to sell distressed companies but in most cases they were looking for a sale price that they required to pay off debt rather than what they were worth. We happily wished them good luck and they listed with other brokers. Most are still on the market because an overpriced business is even harder to sell in a recession than normal times.

We moved into our new offices officially at the end of November. Our previous landlord wasn’t keen to sell us our previous premises so Paul had been looking for something for us to buy and we are now at Level 4, 12 O’Connell Street. This is directly opposite the top end of Vulcan Lane. The floor came with an operational gymnasium so we are gym owners as well now: Balance CBD. Anybody looking for a place to train in the city let us know.

The logical question is what will 2012 bring us? My gut reaction is that I expect February-March 2012 to be a lot more active because business owners sitting at their holiday homes over the break are going to reflect and ask where did the last quarter of 2011 go. World Cup and Election took people’s focus away. Maybe this is wishful thinking but you have to be an optimist in our game. Have a great Christmas and a happy new year!

There hasn't been a blog post in a little while because all my recent articles have been snapped up by the media and can be seen on our Media page.

Things are certainly a little slow right now in the business sales market. Have talked to a couple of brokers I know and they concur that things look like they could be a little quiet all the way to Christmas. One of them said he thought that it was the country’s total dedication to the World Cup, and in his mind has delayed the normal spring time interest for business owners to look at exiting their businesses.

This concept I believe has merit because it does seem to captivate most of our nation, and maybe the prospect of a World Cup being held in NZ has temporarily dulled the normal motivators to business owners to look to sell. Most years when the days start to get longer we get a rush of business owners start to make contact because to most spring means change.

The interesting thing this year is we just can’t seem to get the owners we are talking to motivated to act and maybe it is as simple as they are more interested in the World Cup.

Can’t see it improving after the World Cup either really because then we head into an Election period. I would assume that most business owners would hope for an election that keeps the status quo but again the uncertainty again will most likely mean that owners who would normally be looking to exit for family, health, age or as simple a reason as boredom will most likely be caught up in the World Cup and Election year malaise.

On the opposite side of the coin we all are seeing significant buyer interest. There seems to be a growing sense of frustration in the buyers I talk to, especially around the quality of the businesses that are on the market. I suppose difficult times bring out the worse in any business category and business brokers are not exempt from this. If there is nothing on the market then less scrupulous brokers will be tempted to market businesses that they might not normally and hope that desperate buyers might not be as diligent in their DD processes.

Had a buyer in our boardroom yesterday who took a call from another broker who informed him that the owner and he had been able to update the financials he had been given and they were emailed through to him. The update was the 3rd or 4th revision of actual management accounts, all revisions were supposedly due to honest mistakes but all indicated an owner and broker trying to justify a price. One of the revisions was required because the rent for the current year was keyed in to the accounting system exactly half of the previous year. Another we saw recently had all staff wages added back because it made the business look unprofitable.

We have happily lost a couple of smaller opportunities to other brokers over the last couple of weeks and neither decision was based on fees but more on the price the broker was willing to go to the market at. In both cases the businesses were barely profitable and after we had appraised the businesses we explained to the owners that the sale price would at best be the value of fixed assets and stock. The businesses in question are now being marketed by our competitors between 30-50% higher value than we believe is attainable, one with a profit figure quoted higher that shown on the financials we were provided with! This is most likely telling the owner what he/she wants to hear and then if an inexperienced buyer doesn’t turn up, position the owner hard during the process to get his/her expectations down to where the market stands.

Experienced finance writer Martin Hawes has previously identified similar behaviour among real estate agents, who appraise a house at a high price to get the listing, only to then set about lowering the vendor’s expectations.

This is certainly not sour grapes on our part. Both Paul and I would rather go and play golf than waste our time, and the buyer’s time, marketing something that is significantly over priced. Just not worth the drama.

This is a risky ploy for the broker if you want to stay in the game long term. Buyers in the most part don’t respond to obviously overpriced opportunities.