Not once in the previous three years did anyone show any
interest in buying distressed companies.
This year, however, three separate buyers have inquired as to whether we
have any distressed companies for sale.
It is obviously a growing strategy. The first buyer was very specific. She was looking for building supply yards
that have been in decline. Not a bad
The next two buyers were more general, but “buying low” was
definitely their strategy. One was a
private equity group with financial backing and the other a private buyer. We don’t have any distressed companies as
clients, so I didn’t talk to these buyers much.
I would be curious as to what they are looking to pay for distressed
Although it easy to look at these buyers as bottom feeding
sharks, they actually play an important role in helping set the bottom of the
market. Most buyers, me included, would
be very nervous about buying a company with declining revenues. When will the decline stop? However some of these business owners are in
a dire situation. Divorces, health
issues and partnership breakups continue to happen, so some of the sellers have
to sell regardless of the economic situation.
These contrarian buyers will step in (sometimes) and buy these
businesses, giving the seller liquidity when no one else will help them.
I did keep the name of the private equity group. If you do happen to want to talk to them, go
to my website www.compasspointcapital.com
and fill out the contact form. That goes
to me, and I’ll get you in touch with them.
Be aware that private equity groups typically deal with companies with
revenues of about $3 million and above.