As we have discussed in prior posts, the sheer number of baby boomer business owners who will be retiring throughout the next 10 years or so could swamp the market. No generation in history gave birth to so many businesses. Conversely, no generation of business owners will be retiring in greater numbers in a relatively short time span.
In fact, according to many estimates, about 60 percent of the 15 million privately held businesses in the U.S. are owned by business owners born before 1964. The fear in the M&A industry is that far too many of these baby boomer owners will wait until the tail end of the next 10 years to exit, overrunning the buyer pool dramatically (making the notion of getting started on your exit planning now far better than waiting).
But now for the good news: Contrary to the common misconception that Millennials are lazy, self -absorbed, and addicted to social media, reports are now surfacing that many of them are not interested in working for a large corporation or a government entity after leaving college. No, in fact, many are using new funding sources to aggressively pursue privately held baby boomer businesses.
Analysts that are tracking this trend come up with several reasons:
“One, they really want to exercise leadership early in their careers; they don’t want to wait 10 or 15 years before they get real general management responsibility inside a large company—they want that experience sooner.
“Two, they want a direct link between their work and their reward. Three, they want the professional independence of not having a boss. Certainly, they answer to their customers, their employees, their regulators and their investors—but it’s all different from having a boss,”
These were the words of Royce Yudkoff, professor of management practice at Harvard Business School. Analysts are seeing more and more Millennials pursuing the entrepreneur path via an acquisition rather than what their parents did: land a job with a major corporation.
Yudkoff attributes the growing interest in baby boomer business acquisitions to increased awareness, as well as larger forces in the economy—including the number of small companies coming up for sale along with the fact that careers in large companies seem less secure or predictable than they were 20 years ago.
Again, this is really good news for baby boomer business owners who are taking advantage of our current seller’s market to prepare their companies (and themselves) for an acquisition event and other M&A activity. And most interestingly, these Millennial buyers are using a variety of funding mechanisms to finance their acquisitions.
Given that the Millennial generation will surpass the size of the Baby Boomer generation by 2019, being interested and able to finance the acquisition of baby boomer businesses will supply sellers with a new and growing source of buyers. And, according to reports, Millennials are not only interested in acquiring just smaller businesses.
With the funding sources now available to them, privately held businesses of all sizes across a wide array of industries are attracting this new generation of entrepreneurs.
But keep in mind that you will need to be proactive if you want to attract these types of buyers (or any buyers for that matter). Proactive means getting started now on your exit process. Even if your exit time frame is 5 years out, getting your business “buyer ready” takes time. The longer you wait, the more you risk being forced to sell when you have to, not when you want to.
If you are interested in learning more about Millennial buyers as well as all other buyer types that we work with, you should set aside some time and attend a Generational Equity exit planning conference. We hold these throughout North America and odds are good you will leave the meeting with a wealth of knowledge about how to effectively prepare your exit strategy and approach professional buyers to secure an optimal value for your business.
To learn more, use the following links:
Remember: if you are a baby boomer business owner, the M&A market stands to become incredibly crowded, incredibly quickly, within the next decade. Timing when you sell your business will play a huge role in determining the value of your company, so don’t miss your ideal opportunity.
By Carl Doerksen, Director of Corporate Development at Generational Equity.
© 2021 Generational Equity, LLC. All Rights Reserved.
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