Owners who are thinking about an eventual transition from their privately-held business are well served in understanding the optimal timing for that exit transaction.  Whether an owner is thinking about passing the business to insiders or selling the business to a financial group or a strategic buyer, timing matters because the economy moves in cycles.  The economic cycle that drives business behavior and performance will also, in all likelihood, have a substantial impact on an owner’s exit.  This newsletter is written to provide an update on a decade-old chart and concept that helps owners predict and plan for the timing of their optimal exit.

Introduction to the Transfer Chart

Rob Slee, in 2004, introduced the U.S. Ten Year Private Transfer Cycle chart through his book, Private Capital Markets.

In short, this chart predicts that every ten years or so, the transfer cycle (which matches the economic cycle) repeats itself, providing good and bad times to exit a business.  If this is true for the current decade, then business owners may want to consider that by 2018, the window to transfer or exit your business may close in a manner similar to the way that it did in 2008.

Where We Are in the 2010-decade Cycle

To summarize the cycle that we are currently in, we begin with a review of 2008 and the last financial market decline.  Similar to prior cycles, the market decline started towards the end of the last decade.  However, unlike prior decades, the 2008 economic drop was a once-in-a-generation type of collapse of the world financial markets.  The timing of the last drop was predictable.  However, what was less predictable was the severity of the decline.
(more…)

Read More