Buoyed by robust middle market M&A activity in 2018 and 2019, industry specialists held cautiously optimistic views for 2020 and private and public markets were strong. The pandemic has particularly impacted small- and medium-sized businesses and slowed the pace of M&A activity.* Now business owners may be wondering, given the pandemic and the slow down in M&A activity, what this all means for the value of their business.
To help answer that question, UBS On-Air spoke with Michael Carter and Scott Gabehart, the CEO and Chief Valuation Officer respectively of BizEquity, a leader in online informal valuations for private businesses and a tool that several UBS Financial Advisors leverage to bring additional insights to their business owner clients.
While changes to the public market are visible, valuations for private companies are less obvious. Overall, Gabehart points to GDP as closer approximation than the public stock market with valuations lower by about 15% to 20% per his research.
And yet, the two valuation experts agree that there is no one-size-fits-all approach. “Within sectors,” says Gabehart, “some subsectors are improving and others are deteriorating. It’s not an across the board impact.”
“It’s not just industry specific, but it’s also business model specific,” added Carter. Carter points to subscription-based revenue businesses as one example of businesses that may be doing better because they “don’t have the dependencies of retail and physical space.”
For businesses that have made it through the initial crisis and are looking to what’s next, Carter recommends getting a better understanding of the value of the business now, even with reductions to help identify areas of strength and weakness. Once identified, a strategic plan can be built with employees and outside advisors to restore and even grow value. “One way to think about it is like a GPS system. You can’t really put in where you’re going unless you know where you are today.”
Listen to the podcast to hear more insights on what drives business valuation and how things have changed as a result of the pandemic. Speak with your UBS Financial Advisor and learn more about how your business can navigate the COVID-19 crisis or by visiting the UBS Business Owner Resilience Center.
Main contributor: UBS Editorial
Listen to the UBS On-Air episode After a pandemic, what's my business worth? 19 August, 2020.
*What’s next for mergers and acquisitions” Forging the new normal: Business owners lead the way to a changed world
(For Public Distribution)
Approval date: 8/19/2020