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Lead Your Team Personal Growth

Boomer Retirement Drives Sale of Businesses

business ideas, entrepreneurs Credit: Baby boomers image via Shutterstock

For the first time, baby boomer entrepreneurs looking to retire are driving the sales of businesses, a new study finds.

Research from the International Business Brokers Association, M&A Source and Pepperdine University revealed that 35 percent of business brokers are expecting selling activity to increase this year due to baby boomer retirements. Previously, potential tax increases were the top motivating factor for owners wanting to sell their businesses.

"Boomer retirement will be a consistent trend, particularly now that 2009 is four years behind us for valuation purposes and the first boomers are now 67 years old," said Scott Bushkie, principal of Cornerstone Business Services. "Many boomers would have sold in 2009 or 2010, but they got blindsided by the recession and had to hold on much longer than expected."

Overall, John Paglia, associate professor of finance and director of the Pepperdine Private Capital Markets Project, said the majority of business brokers are feeling optimistic about market activity in 2013.

"They're expecting activity to increase due to baby boomer retirements along with greater market clarity following the presidential election and fiscal cliff resolutions," Paglia said.

The research also revealed that it can take smaller, independent businesses significantly less time to sell than larger ventures. In all Main Street sectors, the majority of companies sold within six months, while businesses in the lower middle market — those with between $50 million and $1 billion in annual revenue — can take between eight months and two years to sell.

"Companies in the lower middle market really need to be proactive in their planning," said Kevin Dempsey, principal of Summa Financial Group and chairman of the M&A Source. "Burnout and family issues are two big reasons these owners sell, but when it takes a year or more to sell a company, you don’t want to be reacting to negative triggers — especially as buyers put the most value on your last 12 months of business performance."

When it comes to who's buying, smaller businesses are much more likely to find a buyer close to home. The study discovered that most buyers of businesses with less than $1 million in revenue were located either within the same metro area or same state as the selling business. However, buyer distance jumped considerably for businesses valued at more than $1 million, with more than half coming from out of state.

The study was based on surveys of 215 business brokers and M&A advisers.

Follow Chad Brooks on Twitter @cbrooks76 or BusinessNewsDaily @BNDarticles. We're also on Facebook & Google+.

Chad Brooks

Chad Brooks is a Chicago-based freelance writer who has nearly 15 years experience in the media business. A graduate of Indiana University, he spent nearly a decade as a staff reporter for the Daily Herald in suburban Chicago, covering a wide array of topics including, local and state government, crime, the legal system and education. Following his years at the newspaper Chad worked in public relations, helping promote small businesses throughout the U.S. Follow him on Twitter.