Strong business yield

Strong business yield

Business Sales Article

Strong business yield

During the past 10 months there have been a significant number of business sales, including a large women’s gym and a Challenge service station, both in South Auckland; a large manufacturing company; Albany Park Motor Hotel in Manukau City; Heritage Court Motor Inn, Wellington; and two privately-owned supermarkets.

All of these businesses had turnover in excess of $1 million and have been sold to New Zealand residents.

While there is room for offshore buyers to purchase a business under the immigration investment category and some look at businesses similar to those they have been associated with in their own country, the biggest deterrent is obtaining residency as this is a timely process and generally takes longer than the business owner is prepared to wait. We are finding that there are many local purchasers at present for the businesses that we are selling.

Bayleys’ head of tourism and business sales Paul Dixon says while there is any number of businesses on the market at the same time, whether there is a successful sale depends on the experience of the purchaser. “Mostly people are keen to buy a business they have a dynamic and some association with, for example, manufacturing or construction.”

The biggest trend in recent years has been the proliferation of businesses associated with the thriving construction industry – trades, scaffolding, flooring, concrete, roofing – all buoyed by the strong economy. A vast array of new companies have been established and have matured as the building boom continues.

Another business area that is expected to flourish in the next two to three years and beyond, if Team New Zealand defends and retains the America’s Cup, is hospitality. New businesses will establish around the central city, Viaduct Harbour and Wynyard Wharf, and recently there have been a number of hotels and bars bought by numerous entities within New Zealand and offshore.

Dixon says there is a strong demand for eateries and hospitality businesses within central Auckland and around the redeveloped Wynyard Quarter in readiness for the 2021 America’s Cup races.

The length of time it will take to sell a business is a question Dixon is often asked. “It can be quite short depending on whether the business for sale is ready to go on the market.

“The most important aspect of a business sale is to have a correct appraisal so marketing strategies can be prepared, and to also identify how to present the company in a manner that due diligence is easy for the buyer.”

Dixon says there is never a right time to sell a business because the market and economy are always changing. “This has to be the best time in decades to be in business. The economy has had an 11-year bull run and low interest rates are set to stay for at least a couple of years.”

However, with a multitude of baby boomers reaching retirement age it is expected more businesses will come on to the market, as there is an ongoing need for these business owners to sell or transfer their businesses to new owners

“There are a lot of buyers with cash wanting to invest in a business as opposed to property,” says Dixon. “Businesses are performing better on yields than property. Generally speaking, if a buyer purchases the right business the returns can be more advantageous.”

Contact one of our specialist business brokers for an informed and timely take on the market and how we can achieve a great result for you.