In recent posts I have talked about the fact that there is a lot of buyer interest in the market at present, and this remains the case. But there seems to me to be no real sense of urgency for buyers involved in these transactions.

We are averaging about 30 requests for information on each business that we have released in the last 6 months and under normal circumstances about 10 of those would come back to us within 24 hours looking to get a ‘first movers advantage’ on other interested parties. Now there is probably only 1 or 2 that are doing that.

The other 28 seem to be a lot more pensive and contemplative about the opportunities that they are introduced too. This is understandable to a point I would say, but you either want to buy a business or you don’t. A recession like we are in is obviously going to make purchasers have to be more careful, ask more questions, get more information for their advisors, jump through more and more hoops for their financiers and generally look to mitigate risk more than in better times, but the decision making process on whether to proceed to the next step needs to be made, is either a yes or a no, not maybe and I will ring you next week. Next week never seems to come for most.

I ask myself what, over and above the recession, is the reasoning?

1. Is the quality of the offerings not of a high enough standard to engender urgency? Is urgency created only when a business category is sexy enough to a buyer on a personal level?
2. Maybe buyers are looking at certain businesses or business categories because there is nothing available in the categories they would normally be interested in. Maybe their thoughts are I need to buy something and this is all that is on offer so I might as well have a look. And then can never get themselves to move.
3. Do buyers understand how to do their Due Diligence on risk? We have been in a good market for a long time and maybe buyers aren’t able to get past the fact that all business involves risk. In a recession the risk is more identifiable and businesses are generally priced accordingly.
4. Are buyer’s advisors now so paranoid about the market conditions that saying ‘no’ is their safest option. We have certainly seen numerous instances of this.
5. Have some of the Banks made it such a traumatic experience for a buyer to apply for a loan that the majority of buyers can’t take the next step? We have had good experiences with two of the Banks, 3 of the major players will need to show us things have improved before we would want to recommend them.
6. Has the weight of the negativity from most of the media now become so pervasive that it has entered the psyche of the buyer? There must only be so much people can take before it all seems a little too hard.
7. Maybe it is just that there are only smaller businesses on the market at present. Buyers for these scale of businesses are generally using their homes as security and if you add up all the factors above maybe it gets too hard to mortgage your home.

So if you are a buyer who actually wants to buy a business, there really couldn’t be a better time. History points to investors who invest when the market is down are those that make the largest capital gains. The risks are higher but they are also more easily identified because when a business is struggling those risks are actual not potential anymore. So if you feel that you can improve the business, then buy now, buy at a price that reflects the market conditions and risks associated with the business, ride out the downturn and then build equity in the business when the markets turn. Or wait it out and buy a business off someone who did buy now and pay for their increased goodwill accordingly.