It’s not just big companies that are buying each other at a rapid pace these days. Small-business owners in Charlotte sold their enterprises in record numbers in 2014, as favorable interest rates and rising confidence brought buyers to the table.
At least 54 Charlotte-area private businesses had been sold through the third quarter of 2014, according to the latest figures available from BizBuySell, an online marketplace for small-business sales. That’s up 42 percent from the same period the year before, and a post-recession high.
It’s a trend that’s been heating up since about 2012, and it’s happening all over the country: In the third quarter of 2014 alone, nearly 2,000 small businesses in the U.S. were sold, up 18 percent from the same time the year before.
Driving the trend, analysts say, are buyers looking to take advantage of interest rates while they’re low, baby boomers hoping to sell their businesses and retire, and confidence in a recovering economy.
“We had a bunch of buyers and sellers sitting on the sidelines until the market started to improve,” said Bob House, BizBuySell’s general manager, based in California. “Continuing business performance and increased personal asset wealth of individuals ... brings folks back to the bargaining table.”
In August, Susan Meadows and her husband, Dennis, sold Bed & Biscuits, a Lake Norman pet resort they started 13 years ago. Approaching their 60s, they searched for less physically demanding work.
It was good timing.
“The economy was really picking up, and the banks started loaning again,” said Susan Meadows, 60. “We were hoping there was a market to sell our business, and there was.”
For years, prospective buyers had asked the couple if the business was for sale. But given the economy, the couple doubted the buyers could secure loans.
“You don’t want to put (the business) on the market if no one can buy it,” Susan Meadows said.
Pet Paradise, a Florida-based chain of pet resorts with a location near Charlotte’s airport, wound up buying it without borrowing any money, she said.
With 20 resorts in the Southeast and Southwest, Pet Paradise had been looking for a second Charlotte-area location, said regional director Dina Beam. They’d been looking at south Charlotte but changed course when they learned Bed & Biscuits in Lake Norman was for sale, she said.
“We automatically jumped on it because of their reputation here,” Beam said.
Rather than retiring, Meadows said she and her husband want to find part-time work.
“It seemed stupid not to (sell) if a buyer stepped forward,” said Meadows, who like other sellers interviewed did not disclose the sale price. “It was difficult, but on the other hand, you have to move on. You have to look at all the different parts of your life and what you want to do next.”
‘White hot’ market
Jon Payne, 34, had seen his Fort Mill, S.C., online marketing firm grow, employing 15 people and enjoying record revenues by 2012. But like many small-business owners, the father of three found that vacations and evenings off were hard to come by. He considered hiring more people but worried about the overhead.
On a whim, he said he went to a broker to see how much his business, Ephricon Web Marketing, was worth. He liked the results.
He remembers thinking: “I can change my lifestyle .... Here’s an opportunity where I can free things up a little bit ... lower my stress level.” Having more money for retirement and college savings wouldn’t hurt either.
He found Straight North, an Illinois-based marketing firm actively searching for businesses to buy. It took 90 days for Payne to execute the sale. Now Payne is focusing on his Net Focus Media, a holding company for three Internet businesses.
Brad Offerdahl, owner of Charlotte-based Viking Mergers & Acquisitions, said Charlotte’s an attractive market for acquirers elsewhere who are looking to grow. “Businesses that we deal with here, for the majority, are doing very well,” he said. “(Buyers) are coming in; they want to grow their business.”
“This market is white hot,” said Don Millen, owner of Charlotte investment banking firm Dragonfly Capital. “Businesses are doing better, so the economy is improving in general.”
Strategic, corporate buyers who accumulated cash reserves during the recession are ready to spend, hoping for growth, he said. Fund managers with plenty of capital are looking to invest in private companies with steady revenue growth.
Those buyers can now borrow large sums to finance acquisitions at low interest rates – “rates that are not likely to stay this low for too much longer,” said Robert Stonebreaker, an economics professor at Winthrop University.
Economists are watching closely to see when the Federal Reserve will raise interest rates, though Fed Chair Janet Yellen has said she foresees no rate increase during the first quarter. Millen said a rise in rates would cool things off.
“Now, we’re in an up cycle,” he said. “A lot of small-business owners should consider taking advantage of the window if (they’re) close to retirement or transition.”
That window, say experts, is an opportunity for business owners looking for an exit and sizable payout for their enterprise – both of which were in short supply during the recession.
“During the recession, there was too much fear,” said Michael McNamara of Charlotte-based accounting firm GreerWalker. “Buyers feel that because conditions are improving, businesses that have performed historically well will do better in the future. They’re going to get a return on their investments.”
Quality of life
Mark Eudy chose to sell rather than weather another downturn.
His parents had started Carolina Counters, a Cabarrus County supplier of laminate, granite and culture marble for countertops, in 1983. It had consumed his life since age 23.
He’s 50 now. Two of his children are in school. Two others have already graduated. He grew tired of 12-hour work days, six days a week. He built a new house and his priorities changed.
“It came to the point that my quality of life was better than the amount of money I could make,” he said.
In March, he sold Carolina Counters to MLM Ventures Inc.
Carolina Counters prospered until the crash of 2007, when the business slashed its 80 employees to 20. It required 30-, 60- and 90-day extensions to pay vendor bills after years of paying them within five to 10 days. For the first time ever, the Eudy family had to borrow money when they established a $100,000 credit line. They spent an additional $300,000 for new equipment.
“We put personal money back into the (business),” Eudy said. “I cashed an insurance policy in to keep it running.”
The Eudys finally caught a break in 2012, he said, when business started to revive and Eudy paid off its debts.
By then, he was disillusioned. An only child, there was no doubt he would inherit the business from his parents. But his children want nothing to do with it, and the prospect of borrowing more money one day was disheartening, he said. Selling was his way out.
“I wasn’t going to go in debt anymore,” he said.