September Small Biz Sales Up

More small and mid-sized California businesses for sale found buyers last month than in any September over the past five years. The 1,232 deals closed in the just-completed month represent an increase of nearly 23% compared to the tally of 1,004 transactions during September 2011, according to the BizBen Index which collects and reports data on the rate of business transfers throughout the state.

“This is an encouraging sign, but it would be premature to say that the lagging marketplace where businesses are bought and sold is finally improving,” said Peter Siegel, MBA, Founder and President of parent of the BizBen Index.

“Part of the explanation for the increase in the rate of business sales is because of the backlog of deals delayed in August when several principals (buyers and sellers) took vacations,” according to Siegel.

He said the rate at which entrepreneurs buy a California business “has yet to recover from the precipitous drop in activity” following the banking crisis in 2008, when “it became so difficult to borrow money” and “owners have been reluctant to sell companies that are declining in value in the slowed economy.

“A lot of people who want to sell or to buy are still on the sidelines waiting for the market to look and act the way it did five years ago. That contrasts with many of the winners in this environment who are adapting to the current realities and finding ways to meet the difficult challenges so they can close their deals.”

Increased sales activity last month was recorded in most of the state’s largest counties. A total of 366 deals closed in Los Angeles County, up 36% from the 269 escrows successfully completed in September of last year. Orange County saw an increase from September 2011 when 116 deals were concluded to 132 transactions last month. Comparing the same months, the number of business transfers in San Diego County went from 83 to 104.

Among the large counties that saw a September to September decline were Santa Clara, from 55 to 49; Riverside, from 51 to 44; and Sacramento from 38 to 33.

Siegel noted “there actually are more players than we’ve seen in the market in a generation. It’s a combination of Californians who can’t find a secure job and are looking to buy a business, and the hundreds of thousands of baby boomer owners ready to retire and starting to put their business opportunities up for sale.

“We’re definitely is the midst of a New Economy in th e business-for-sale marketplace. And we’ve been watching the number of sales vary from month to month –some up, some down—without any clear direction. It’s the same pattern we observe in other economic indices, such as stock market prices, consumer spending, new jobs figures, new home sales, and consumer confidence levels.”

The BizBen Index shows that 10,629 small and mid-market California businesses have been sold this year. That’s a small improvement over the 10,475 total through September of last year. But this year’s count is well behind the 16,342 deals that were closed the first nine months of 2008.

The September 2012 sales totals for California’s small and mid-sized businesses can be found here.

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