Industry Consolidation
30 August 2021
Industry consolidation…It’s happening all over the place! There has been a great deal of industry consolidation over the past couple of years and the trend is continuing. What is industry consolidation? It is the condition in which business expand by acquiring other businesses in the same industry; usually – but not always – larger companies acquiring smaller ones. While these deals are sometimes strategic moves by the acquiring businesses, they aren’t always. In many cases, businesses try to sell themselves to a competitor. Sometimes that competitor will view the acquisition as “strategic” but often they don’t. So, why are we seeing this trend? Well, for several reasons.What’s Driving Consolidation

Two Examples

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Our course, “Learn How to Value and SUCCESSFULLY Sell Businesses“, teaches you how to value and sell businesses.
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There are dozens of multi-unit store owners that are eager to expand into new territories and the best way to do so is by acquisition. One of the individuals that has completed our Course is in the hardware industry. When he was contacted by another owner in their industry about finding a buyer, he contacted the owner of a chain of roughly 75 stores in a territory adjacent to the seller’s store. In fairly short order the deal was done at nearly $3 million. The owners of the larger chain were interested in continued growth via acquisition. The seller was part of that Silver Tsunami I’ve been writing about – Baby Boomers heading for the exits. The fit was perfect and an example of the consolidation in the independent hardware store industry.We’ve launched a coaching program specifically tailored to Realtors that want to sell businesses, business owners and to anyone that wants to become a business broker.
If you’d like to learn more, email me at joe@WorldwideBusinessBlog.com
Buyers: Issue #2
A second example is in the heating, cooling and refrigeration industry which has seen a sharp rise in consolidations among suppliers, distributors, and especially contractors. A number of factors are driving this activity, and experts expect it to continue through at least the rest of the year.
Storm Clouds on the Horizon?
High valuations and plenty of money available make now a great time to sell almost any decently-run business – but that could change next year. Given the amount of money looking to be deployed, the ultra-low interest rates and, thanks to two strong years, high valuations, sellers are in the proverbial catbird seat. But there are storm clouds on the horizon. Interest rates ate likely to rise in mid- to late-2022 and the economy weaken as a result. Both of which would slow acquisitions.
The Bottom Line
When a consolidation phase gets started, business owners that have been thinking about selling – or that might sell in the near future – have an opportunity to get top dollar for their business. But when the planets seem to align – lots of money chasing businesses, low interest rates and a growing economy – the opportunity can be even more compelling. If you have any questions or comments on this topic – or any topic related to business – I’d like to hear from you. Put them in the comments box below. Start the conversation and I’ll get back to you with answers or my own comments. If I get enough on one topic, I’ll address them in a future post or podcast.Searching
I’m adding a new section to these posts. We’ve constantly receiving inquiries from buyers – usually small private equity firms, family offices and occasionally high-worth individuals – searching for specific types of businesses. The number of these inquiries has been growing steadily and I want to let you readers know what we’re looking for just in case you have something that might fit. This morning we received an email from our colleagues in London about a client looking for MSP (managed services provider) in SE England. If any of you UK readers know of something that might fit, please let me know.I’ll be back with you again next Monday. In the meantime, I hope you have a safe and profitable week.
Joe

The author is the founder of Worldwide Business Brokers and holds a certification from the International Business Brokers Association (IBBA) as a Certified Business Intermediary (CBI) of which there are fewer than 1,000 in the world. He can be reached at joe@WorldwideBusinessBlog.com