Our Economy on the Rise (Knock on Wood): Should You Sell Your Home – OR Your Business?

Is it just me, or is everyone you know selling and buying homes right now? Five of my best friends have purchased new houses in the Twin Cities area and concurrently sold their previous dwellings just this spring. Two of them were forced into closings on their new purchases earlier than what they would have preferred, worrying that it might take some time for them to sell the condos they have lived in for the past few years. Both sold their condos in less than a week – for more than the asking price! During the process of viewing new homes with their realtors, all friends also experienced bidding wars and houses sold out from under their noses without getting a chance to bid or counter.

While I admit that my friends and I are in the typical age range for thinking about buying a new home (the “almost-30—but-definitely-not-yet-30” range), this housing market frenzy is not just a product of peer pressure in my close-knit circle of college pals. According to a recent Star Tribune article, real estate sellers are “leaping” back into the market, and this past April new listings in the Twin Cities metro area showed the biggest increase in two years. Real estate purchases also increased by over 5% from the same time last year, and the prices paid were over 12% higher overall. 

Reflecting on this recent trend, I was reminded of another article I read in the Star Tribune just a few months earlier related to the market for selling a business. As anyone in the M&A market (including we business lawyers!) has been made painfully aware over the past couple of years, companies have been reluctant to enter into the transaction conversation. However, according to this article, it is not only a “hot time” to sell your home, but also to think about selling your business. Investment banking firms have apparently been seeing valuations rising to pre-recession levels, with the typical six- or seven-times EBITDA commonly used as a valuation yardstick reportedly reaching closer to ten or even eleven times in certain industries. A representative from one of Minneapolis’s local investment banking firms is definitely not the only person who thinks these levels are “extraordinary.”

Even though I am still in a relatively nascent stage of my transactional legal career, I have also personally seen evidence of this trend. I have experienced an uptick in conversations regarding the buying and selling of our clients, and recently sat in on two different meetings with clients and investment bankers – the first two of my almost two-year-long career. The company my husband works for also just recently sold off one of its affiliates in a successful transaction. 

According to the Star Tribune article, there is an “unprecedented amount of capital that’s looking to be invested in business acquisitions,” including large capital pools of private equity investors. Additionally, the bank/lending markets are slowly becoming more amenable to transactions as well, while interest rates remain low. Ultimately, experts in the industry are advising entrepreneurs and other business owners that it’s a great time to think about going to market. While we M&A lawyers agree that these are “very unusual times” as compared to the past few years, we hope they stick around and provide us with some exciting opportunities to assist our clients with successful exits and/or acquisitions in the coming months and years!

A Post by Karen Wenzel, Guest Blogger