Panel: Despite good market, boomers not ready to sell businesses

Although the market could not be better for aging baby boomers to sell their businesses, many are not doing so because they are not ready to give it up, according to financial experts speaking at the Daily Herald Business Ledger's Newsmakers Forum on Banking and Finance Thursday.

About 50 suburban business leaders and entrepreneurs attended the event at the Sheraton Lisle Naperville Hotel in Lisle to hear an update in the state of the financial industry and trends that could affect local businesses.

Eric Lundstrom, founder and president of Focus Capital Advisors Inc. in Downers Grove, said it's a seller's market for mergers and acquisitions, as money set aside by lenders and private equity firms for such purposes continues to grow. However, he added, the number of transactions have declined over the past few years, despite the demand and available cash.

"The reality of all that is entrepreneurs fall in love with their business and they have a hard time letting it go unless something really unusual comes up," Lundstrom said.

Sellers today are older and motivated by factors other than financial, he added. Most continue to invest back into their business and find that practice difficult to give up - a factor Lundstom said is a key driving force behind the robust economy.

"It's us. We're entrepreneurs," Lundstrom said. "We're going to make money and work hard and do whatever it takes to build our businesses no matter what the government does."

Hugh McLean, a partner with Rock Island Capital in Oak Brook, echoed Lundstrom, adding that U.S. companies have almost $4 trillion in liquidity that could be used in investing back through mergers or acquisitions - a number he said was "extraordinary." Business valuations have also increased tremendously, as a well-run company could get more than seven times its cash flow in a sale, compared with five time its cash flow a few years ago.

McLean noted that many business owners are seeing those numbers and thinking they may get a better value by holding out for another year. However, although people are feeling confident about the economy now, he said we are "probably in the sixth of seventh inning" of the current economic cycle and the factors may likely change in the near future.

"You have to sense by historical standards that we are getting near the end of what's been a strong cycle," he said.

Both McLean and Michael Chilvers, business banking market president with BMO Harris Bank, noted how much technology has led to changes in the banking industry. Chilvers said financial technology companies like OnDeck Capital or Kabbage have forced BMO and other traditional lenders to adopt new technology and become more efficient.

"People will not wait three weeks for a loan anymore. It's just not happening," Chilvers said. "Especially in the small-business space, they just don't have time for it."

Online banks are also adding to the competition, as they especially become more popular with millennials, he said. That is leading traditional banks to adjust the way they interact with customers, as they look to lure young customers while maintaining its long-term ones.

"That's where we really have to make a lot of investment in banking," he said. "We need to be as good as they are online, while also having ATMs and branches where you can go into so you can serve everyone."

As banks improve their online experience, they are also moving toward "smart branches," smaller branch facilities with fewer employees that employ more technology.

"Brick-and-mortar is not going away, it's just going to a different place," he said. "We are still close to people, where they can go inside and get advice when they need it."

Robert Esquivel, supervisory lender relations specialist for the U.S. Small Business Administration, talked about how the federal agency can help small businesses get loans to grow and improve. Esquivel noted that technology has helped make the loan process through the SBA faster and easier, noting that the SBA Express program can review and approve a lender in minutes, as opposed to up to six weeks. That has led to an increase in the number of SBA-backed loans made to businesses over the past few years

"In fiscal year 2017 we did $30 billion in financing of small businesses," Esquivel said. "That was done by guaranteeing over 68,000 loans to small businesses. Those loans would not have been done without the assistance of the SBA."

Sponsoring partners of the Newsmakers Forum were BMO Harris Bank, Focus Capital Advisors and Rock Island Capital. Marketing partners were GOA Regional Business Association, HR Source, the Naperville Area Chamber of Commerce and the Small Business Advocacy Council.

Panelist says we're 'probably in the sixth of seventh inning' of the current economic cycle