What will buyers be looking for when acquiring a business post COVID-19?

Business owners may be wondering what to expect when considering the prospect of selling their business in the next 12 to 18 months.   

What can be done during this time to maintain the value in their business?

As business brokers we need to be anticipating what buyers will want to review in order to feel comfortable about proceeding confidently with an acquisition.  We also need to understand how they will perceive the value in businesses post COVID-19.   

Smart buyers will no doubt want to review and consider the following:

  • Historical trading performance will be more important than ever! Buyers will want to review 3 to 5 years of financial information up to 2019.  Profit and Loss reports from July 2019 to February 2020 will also be critical information.   
  • Has the business been able to retain key staff during COVID? JobKeeper payments should be of assistance in enabling the business to retain key staff.  Not having reliable, knowledgeable and long-term employees can weaken the value in a business so business owners should do everything possible to keep their staff employed and engaged with business activities. 
  • If the business has had an INCREASE to revenue during this time, how can the business ensure this revenue remains sustainable into the future post COVID-19?
  • If the business has been forced to close, what plans are in place to re-open and what are forecasted profits for the next 12 months.  Can the business offer new services or products to diversify income and make the business more appealing? 
  • Plant and equipment values are still always critical in assessing business value.  Business owners should know the second-hand values of their plant and equipment at any given time.   
  • Stock values and stock ageing still remain crucial when buyers are reviewing a business.  Both of these items should be regularly reviewed. If a business carries a high value of unnecessary stock buyers may believe the business is poorly run.  High stock values can also impact on the business value.  

There is no doubt that COVID-19 will change the way business brokers appraise the value in a business as it’s important to understand what makes a business appealing to buyers.  Predictions are that there will be many new buyers wanting to purchase businesses post COVID-19.  Business owners considering selling should still feel confident that there will be buyers out there however how well a business has handled COVID-19 will be critical to the final sale price.