Newsmakers: A 'seller's market' for business investment, acquisitions
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It's a seller's market in 2017 as available money for investment continues to outpace the number of business owners seeking to sell or grow their businesses, according to a panel of finance experts at the Daily Herald Business Ledger's Newsmakers' Forum on banking and finance.
More than 60 suburban executives and entrepreneurs attending Thursday's event at the DoubleTree Hotel in Arlington Heights agreed that the current economic climate -- with interest rates still at low levels and available investment cash stockpiling -- provides great opportunities for small- and medium-sized businesses to grow.
"Everyone I've talked to is more optimistic about what's going to go on," said Trevor Morgan, president of Prairie Business Credit in Naperville. "We're seeing a lot more activity than we've seen in years."
Morgan, whose company finances small businesses that experience rapid growth, noted the optimism comes more from a general increase in business activity since the end of the Great Recession in 2013, although 2016 had been relatively stagnant.
"People were holding their breath during the election year," he said. "But since November ... people are beginning to breathe."
Eric Lundstrom, president of Focus Capital Advisors in Downers Grove, echoed that reflection in the area of mergers and acquisitions. While fewer business owners are wanting to sell now, the number of potential buyers is making it a seller's market, with purchase prices going for several times above the business' value.
"There are so few quality businesses coming into the market that the prices are as high as we've ever seen it," Lundstrom said. "There are hundreds of buyers for every seller."
Hugh McLean, a partner with Rock Island Capital of Oak Brook, said unfunded capital among private equity firms in the U.S. is around $565 million, but corporate balance sheets have $2 trillion that is not being spent. The corporate figure doubled in the last six years, he added.
"That's all just sitting there, and that much of it should go into investing into the businesses," he said. "And a natural outlet is mergers and acquisitions."
He noted that it's been almost eight years since the Standard & Poor's 500 average bottomed out, and since then has grown 345 percent.
"Even though it feels like growth had been sluggish, if you had invested during this time, you would've had a 15.5 percent compounded return," McHugh said.
Karen Lennon, founder and president of Wessex 504 Corp., a certified SBA loan company in Chicago, said the current climate is beneficial to small businesses that want to take advantage of the SBA's 504 loan program or the recent refinance program, which allows businesses that own a building with a conventional mortgage to use the program to lock in a fixed 20-year rate and opt to take cash out for business purposes, such as building repair.
"Every business owner should sit with a banker and say 'let's run those numbers,'" she said.
Lennon also rebuked the perception that SBA financing is not limited to minority or start-up businesses, noting the average business seeking SBA help has been in existence for five to six years.
The presenting sponsors for the Newsmakers' Forum were Focus Capital Advisors, Rock Island Capital, Prairie Business Credit aide Wessex 50 Corp. Marketing partners for the event were Arlington Heights and Rolling Meadows chambers of commerce, GOA Regional Business Association, The Management Association, MRA -- The Management Association, and the Small Business Advocacy Council.