Newsletter #88: June has arrived!

Mac
6 hours ago
3 min read

Hi,

Hope you are well!

In the last 2 months, I have been talking to plenty of business owners and acquirers. Coincidentally a good handful of them asked me similar questions, hence I thought of sharing it on this newsletter for the benefit of everyone's learning.

Question 1: I have been hearing a lot of interest in the M&A space for SMEs (below SGD $30 mil transaction value). Are there actual transactions or is it just noise?

Ans: There are a handful of transactions that took place in the past 12 months in the market. These acquisitions are done by a varied sort of business acquirers, not necessarily search funds / ETA folks. I estimate that in Singapore, there are approximately 200 - 400 active acquirers in this space. They are often under the radar.

Question 2: I am unhappy with the offer I received. I think I am getting shortchanged by the buyer(s).

Ans: It's very rare for SME owners for most industries in Singapore to receive an offer that is more than 7X of their EBITDA. Most SME owners received 1 - 2 offers during the period that they are selling their business. In the present market, more than 30% of the SME owners has been waiting for at least 3 years, hoping to get the right offer.

Question 3: What can I do if I am unhappy with the current offer?

Ans: There are a few options for you to realistically consider.

Option 1 - Renegotiate for a higher consideration and favourable deal structure (This is not applicable for all the case, since some buyers have a practice of putting up their best terms on the first offer. Warren Buffett is a famous example)

Option 2 - Play the waiting game. Continue to wait for the next 3 years, if you are lucky, you might get an offer that meets 80% of your asking price and requirements. Just make sure that your business performance improve and not plunge during this period.

Option 3 - Take the 3 to 4 years to improve your business model and fundaments to make it more attractive to investors.

Option 4 - Lower your expectation, close the deal and enjoy your retirement!

Question 4: I want to borrow money from the bank as an individual to acquire the business. Is it possible?

Ans: Singapore currently don't have the banking facilities to lend an individual the money to acquire a business. Unless you are already operating a sizeable business in Singapore or it's a super micro business. You can learn more information about Enterprise Financing Scheme for M&A loan.

Question 5: I have not been able to find the right business to acquire in the last 2 - 3 years.

Ans: Perhaps you might not have a realistic idea of what to expect in the acquisition of a SME e.g. price, business quality, deal flow, etc. More often than not, the buyer may not be psychologically ready for such an endeavour.

Question 6: How does Fey Day operate?

Ans: We are predominantly a sell-side representative. We specialize in providing M&A and fundraising services for SME owners in Singapore and Malaysia. I tend to communicate to SME owners, acquirers and searchers in a no BS and highly contextualised manner.

I share the hard truth (that might be uncomfortable) to all the parties involved. I feel that this is the best way to build trust and contribute to an informed decision-making process in an equitable manner.

Question 7: How do I know you are telling the truth?

Ans: You can always cross-check with other players in the M&A ecosystem. Like with all things, one man's tea is another man's poison. Some people enjoy working with us, some people prefer sugar-coated communication.