Speaking to Accountants Daily, HLB Mann Judd partner Nicholas Guest said he has seen an uptick in M&A activity in the SME sector.
“We're seeing a bit more in the private SME M&A activity and in the level of interest there,” Mr Guest said.
“I guess it is always there, but there is additional start-of-the-year inquiries from businesses.”
Mr Guest said on the supply side, the majority of businesses looking to sell are doing so for succession purposes.
“Most of them are succession-based transitions where they've been founder-owned and run for a long period of time, and the founders have now come to the realisation that they are unlikely to be able to run their business forever and start to think about retirement,” he said.
“For them coming to terms with selling their business is a decision that they make quite quickly, but they don't necessarily appreciate the time frames and the level of work that may be involved to get their business sold.”
Mr Guest said accountants must encourage their SME clients to begin succession plans to ensure transactions can be completed quickly.
On the demand side, Mr Guest said that buyers are coming from three main areas: private equity, direct investments, and investments coming out of family office or high net worth individuals.
“They're looking for largely profitable businesses that can demonstrate a history of being well run and maintained, but that have some opportunities for future growth by adding some more capital and expanding into new markets or different service offerings,” Mr Guest said.