As boomer owners sell, buyers step up

NEW YORK - Baby boomers preparing for retirement are driving a surge in small-business sales, as they find more and more buyers confident enough in the improving economy to expand their own businesses through acquisitions.

In the first three months of this year, the number of sales that closed jumped 56 percent from the same time in 2012, according to BizBuySell.com, an online marketplace for small businesses. Retirement was the No. 1 contributor to business sales in the fourth quarter of 2012 and the first quarter of 2013, according to a survey by Pepperdine University and two trade groups, the International Business Brokers Association and M&A Source.

"It was almost like a light switch went on in January," says Michael Schuster, a broker with World Business Brokers in Miami. "We started getting a lot of activity with sellers who said: 'I don't want to go through another downturn or tough time. I want to see if I could sell my business.' "

Sales are so strong in Florida that Schuster's brokerage is opening two more offices in the state. Three-quarters of the sellers or potential sellers that his company sees are baby boomers, most of whom don't have family members willing to take over their businesses. Some of these owners want to sell just part of their firms, essentially taking on a partner, because they don't want to keep carrying all the risk themselves.

Honey Rand fits the category. After 17 years of running her Tampa, Fla., public relations firm Environmental PR Group, she's starting to think about selling. The 55-year-old wants to get away from the administrative work that goes into running a business, and focus on working with clients.

"Like most people who end up starting a business, I'm really good at the work I do, and I'd love the opportunity to wallow around in it," says Rand. She's optimistic that she'd be able to sell, because she was approached twice by prospective buyers in the last 10 years. And Rand expects that she would remain with the company for a period following a sale to help with the transition to new management.

While she hasn't definitely decided to sell just yet, she plans to talk to a broker soon.

In California, the pace of sales is more of a "slow pickup, not a huge spike," says Dave Richards, owner of Keystone Business Advisors, a brokerage in Westlake Village, Calif.

"Baby boomers are where we're really seeing the growth. It's pent-up demand," Richards says.

"Trillions of dollars of business value are going to change hands in the next 10 to 20 years," says Bob Balaban, managing director at Headwaters MB, an investment bank based in Denver.

He believes so-called strategic acquisitions - purchases by companies looking to expand - will be a key factor in that trend. In a tight economy, companies looking to grow feel that it would take years to build up their businesses.

Creative Kidstuff, a toy retailer based in Minneapolis, just expanded by buying a 26-year-old online and catalog toy retailer, Sensational Beginnings. Roberta Bonoff, CEO of Creative Kidstuff, said the owner was tired and ready to sell. Bonoff declined to disclose the purchase price, but said, "Everybody walked away from the purchase with their needs met."

Both companies serve similar markets, but 87 percent of Creative Kidstuff's revenue comes from its six traditional brick-and-mortar stores. Buying Sensational Beginnings will allow it to expand its online operations.

"We just found this as an opportunity to grow our online business and theirs and have more people get to know who we are," Bonoff says.