Everyone wants to buy retail

It’s a good time to be selling a retail business: retail is attracting the strongest demand from buyers, closely followed by accommodation, cafes and restaurants, according to BizExchange research. By ANDREW KENT

Summary: It’s a good time to be selling a retail business: retail is attracting the strongest demand from buyers, closely followed by accommodation, cafes and restaurants.

Quality businesses will always attract strong demand from buyers, even for those in industries experiencing long-term decline. This is clearly from the number of buyers across all industries and locations seeking to buy traditional urban businesses through BizExchange. But there are exceptions. There is an exception: although business services is one of the fastest-growing industries, buyers are not lining up for them.

The strongest buyer demand is for retail businesses, closely followed by accommodation, cafes and restaurants, BizExchange research shows. There is also strong demand for wholesale and construction businesses. Even manufacturing businesses are sought-after, surprising given that so much media coverage has focused on this industry’s long-term decline.

On the other hand, interest shown in agriculture, fishing and forestry has been well below the share of private business this industry represents. Climate change and short term cash flows are obvious concerns, but there are many businesses in this area that are not at significant risk from either of them. It will be interesting to see what happens when the drought breaks.

The demand across locations is proportional with the spread of Australia’s population. It is strongest in NSW and Victoria, with the ACT and Northern Territory the least popular. Interestingly, location is a much lower priority in potential investors’ criteria than it is for potential buyers. This is contrary to belief that investors like to spend their money close to home.

Property and business services (which includes industries such as IT and biotech) also had a greater share of the investor demand than that shown by buyers. This is a positive sign for industry sectors that often struggle to find bank finance due to its lack of bricks and mortar style security. Given that several of these industries also have very strong growth outlooks it is also a sensible focus for investors.

The weaker buying interest in business services may reflect one of two prevailing attitudes. First, many of these businesses are very small and heavily reliant on the proprietor. Many potential purchasers fear the business and the proprietor cannot be separated effectively. Second, businesses services operators intent on expansion may think it is easier to do so by building up their own business rather than buying competitors.

Although both attitudes might only be valid in some circumstances, they are putting downward pressure on business prices, creating the potential for excellent returns on investment for buyers. Given that it is the largest industry in terms of number of businesses it is certainly worth monitoring for opportunities.