We are currently in the middle of a pandemic on top of dramatic changes to our nation’s political policy makers’ power structure. Either one of these dynamic shifts will have a disruptive impact on all market fields, but we’ve tried to take both into account here in this overview of current market conditions for people looking to sell their business.
As with most important decisions, pros and cons exist in making the choice to purchase the business that employs you. And some elements of the decision are both a pro and a con. Such is the case when you decide to purchase your employer’s business. As an “insider” you are generally very familiar with the operations and personnel involved in the business, which gives you a distinctive edge over an outside purchaser. At the same time, that advantage can create a blind spot as you make a buying decision based on your presumption that the business will continue operating as it had in the past, prior to you taking ownership. Even if no immediate changes are made in operations, there may be changes in performance as the people who knew you as a fellow employee adjust to the idea of you as their new “boss”. That being said, however, the advantages an insider has in purchasing a business generally outweigh the challenges.
Family-owned and operated businesses are an extremely important part of our economy. According to Grand Rapids’ Family Business Alliance, the greatest part of America’s wealth lies in family-owned businesses. Far too often, we see family businesses purchased by out-of-state buyers and private equity groups that are not connected with the community. They have to strip the company to make the deal work with little consideration of how this will affect the surrounding community. Art Van Furniture and Hemisphere Design were both fine examples of family-owned businesses that are now out-of-business after being purchased by geographically removed private equity firms.
Muskegon Michigan - Hardware Distributors, Inc., founded in 1952, was a third-generation family-owned business operated by Dan Workman and his three cousins. In a recent transaction, Eric Seifert from Left Coast Capital was able to successfully sell Hardware Distributors, Inc to Greg and Jill Lamphere. Greg is a sales professional and has a worked in the paper and packaging industry. Jill operates a family business.
MUSKEGON — Marketing and branding firm Revel has acquired Borns B2B.
The deal, which closed Jan. 30, “augments and enhances” Revel’s capabilities, partner and CEO Jason Piasecki said. Muskegon-based Revel serves small and mid-sized manufacturers, primarily in West Michigan.
“Their processes are in tune with what our industrial clients are looking for, particularly in lead generation, brand building and web development,” Piasecki said. “Their B-to-B expertise helps us towards our goal of becoming the top marketing resource for small to midsize manufacturing companies in America.”
Muskegon-based Left Coast Capital Resources LLC brokered the deal, which was financed by Community Shores Bank, also of Muskegon. Terms of the deal were undisclosed. READ MORE
Locally owned and operated businesses are a unique asset to West Michigan’s economy, but that dynamic is changing as more owners opt to sell to private equity firms that have increasingly targeted the region for deals.
Many locally operated businesses in the region have 100 or fewer employees, yet they still provide 65 percent of jobs and an estimated $25.8 billion in output in the region, according to The Right Place Inc. The recent “erosion” of local ownership is an issue the organization plans to focus on in the coming years, according to The Right Place President and CEO Birgit Klohs.
“We have become a hotbed for the PE industry,” Klohs said during the organization’s annual economic outlook last month. “It changes the makeup of our community to some degree.”
Private equity firms have capital to spend, and they’re attracted to the region by fiscally conservative, well-managed companies in their target markets, especially in manufacturing. This shift in ownership from local individuals to private equity funds has the potential to affect the longevity of the company within the region and changes conversations surrounding retention and expansion, according to Klohs. Next month when The Right Place plans to introduce a new three-year strategic plan, it expects to include preserving local ownership as one of its main pillars.
“I have no doubt that if we identify a problem in this community, we will figure out how to tackle it, because that is what we do,” Klohs said, adding that the plan will take a “serious look” at how to stimulate local buyers.
One of the main drivers of the issue is that many of the local owners who are selling their businesses are Baby Boomers who do not have a succession plan in place but are ready to retire.
“You can’t keep someone from selling a business if there is nobody to run it,” Klohs said.
That’s resulted in a rush of West Michigan companies hitting the market at a time when private equity firms from large metro areas are starting to look down market, according to Eric Seifert, principal of Muskegon-based Left Coast Capital Resources LLC.
“The PE groups have raised a lot of money in the last several years and now they need to deploy it, so they’re really beating the bush to find deals,” Seifert told MiBiz. READ MORE