Do I buy my competitor now or wait?

Dear Aunty B,

My competitor is a badly run smaller business that has lost focus.

I want to buy part of the business and we have been in negotiations but stopped talking a few months ago.

I read yesterday that the small and medium sector hasn’t even been hit by the crisis yet. Should I wait in the hope that I can pick it up for cheaper in six months? Or should I make my move now?

Timing is everything,
Vic

Dear Timing is everything,

If you wait, you may well get it cheaper. There is no doubt that this recession is going to get worse before better, and prices for businesses will come down further.

It is always interesting to read the banks’ results and their comments on business. Mike Smith, chief executive of ANZ, said yesterday that the cycle comes in three stages.

The large end of town that is highly leveraged, burdened with business models that don’t work any more, fall first. Next is the mid market, and we report on that today. Then third to be hit is the small and medium businesses and the consumer side of the economy, which is driven by unemployment and the result of the collapse of the first two.

Now the news that the SME sector has not yet felt the impact of the global financial crisis will cause many small business owners to roll around laughing in disbelief, and comment yet again how out of touch bankers can be. However many will agree with Smith that they have not been affected and business is good.

However what you describe is a business in trouble, and it might not be around in six months. You could wait and pick it up from the receiver, but there are problems with that.
Another problem with waiting six months is accessing funding from banks. You think it’s bad now? Just wait.
If you are sure this acquisition is right for your business, and you are happy with the price and have your integration strategy worked out, then don’t wait. Go for it.
You also say you have not talked for a few months. You may well find the business owner more accommodating on price than they were even two months ago.

Good luck!
Your Aunty B,

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