Every year sees different trends and market movements and 2023 has been no different. Uncertainty and a lack of growth means that there are no ‘rich pickings’. For business people and entrepreneurs, judging what 2024 will hold is essential for both planning and growth.
Of particular interest will be the trends and advances that will make 2024 distinct from any other year. Anyone planning to acquire a business will have plenty to think about and to choose from in the coming twelve months.
Will it be Business as Usual?
In the political world, few could have predicted the outcomes we have been presented with in 2024. And yet, with Brexit still uncertain, splits in the main political parties and a weak global economy, we need to embrace the uncertainty means that there is opportunity for the bold and adventurous.
For many, political uncertainty can translate into a more timid business atmosphere, which means that there is plenty of opportunity for forward-thinking entrepreneurs who want to make their capital work for them.
If competitors are failing to reinvest in their business, waiting to see how things pan out, then 2024 may be the best time to progress with business acquisitions. So far, rather than slowing down, the market for business purchase remains buoyant.
As we type this, the UK’s economy continues to remain above water, with healthy employment levels and the sort of surplus that many European states are envious of. Transactions in the business acquisition market are still flowing. 2024 is likely to bring volatility and some uncertainty, particularly as Brexit takes shape, however it is reasonable to expect business to continue as it has done at other times of change.
Will 2024 Be the Right Time to Buy a Company?
Companies looking to use business acquisition to grow are ideally placed for 2024. Overseas markets continue to open up in China, India and a slowly resurgent Brazil, businesses can find new suppliers, customers and partnerships simply through acquiring companies with a presence in these emerging markets.
Even if your business model is domestic and EU focussed, you may still want to mitigate for the potential of tariffs within Europe, meaning that now is the time to enter emerging markets. Even if your output serves UK clients, growth through acquisitions still makes sense for the reasons it has done for years: cost reduction, increased economies of scale and more reach into new territories.
What Are Buyers Looking For in the Coming Year?
Private buyers, venture capital groups and entrepreneurs will still prioritise reliable yields in 2024. What is considered a good return on investment tends to vary from sector to sector, with a general litmus test of 10% net margin showing enough promise for a second look. However, given the current political situation, many investors are content with lower risk opportunities and conservative acquisition policies.
Businesses with freehold properties remain attractive for anyone who wants to mitigate risk: the value of the land and commercial buildings provides an asset even if the company produces a poor performance.
For investors looking to increase returns, perhaps those who already have plenty of stable assets, then acquiring companies with a higher goodwill to asset ratio is often the preferred option. This is a riskier strategy, but when it works, it delivers a stronger return on investment.
What Business Sectors Should You Be Looking At?
Buying companies for either a strong asset-backed base, or with considerable growth potential, will be the main choice for investors in 2024. Understanding what you want out of a business investment and how it can augment your own will be the determining factor in which strategy you opt for. Some people require a stable investment to mitigate for potential volatility in their market, whereas other need quite the reverse.
When seeking a high-yield strategy, rapidly growing sectors such as cloud computing and clean-tech that are likely to be attractive in 2024 and beyond. Businesses engaged in the sharing economy and those which are developing technological ideas for the healthcare sector are also going to have significant interest.
As always, it is a meticulous hunt: finding the right business to buy requires a great deal of acumen, but the risks can be minimal. In common with every year for the past decade or so, betting on technologically savvy start-ups is likely to remain the fastest route to high rewards in the coming period.
Seeking solid rather than spectacular growth is also a perfectly acceptable reason acquiring a business. The smart money is likely to avoid the property sector, both property companies as well as suppliers of products and services to builders. The value of property has started to contract in certain areas. However, unlike earlier years, the rental and letting sector will continue to flourish as it takes the load.
As it has been for many years, in almost all sectors past performance will still be the main indicator of future performance and dictate future values. The one exception will be export and import companies reliant on the seamless trade with the EU – until the dust has settled, you would do well to wait.
What Will The Future Hold?
In summary, buyers are looking for the same things from their 2024 business acquisitions that they always have: high-quality firms with both strong profitability and high yield potentials.
After that, strong management teams and reliable customer bases are the next most important factors. As before, acquisitions in the coming year will require planning, good advice and careful consideration.
Off-market searching is particularly useful for trade buyers as they will find very few companies for sale, particularly ones which are the right fit for their strategic goals.
In all cases, by actively approaching businesses and engaging them in preliminary conversations, there is a greater chance finding the right business opportunity available at the right price.
Speak to the Business Buying Experts
So if you are seeking to acquire a business in 2017 that will drive high growth for your company then speak to the independent experts, Unloq, on 01962 609 000.
We help clients find and acquire the perfect business for them, assisting throughout the process with research, analysis, and negotiation. Call us now for a free and confidential conversation.
