Business for sale in Ukraine: summer results | Sale of business

...does it cost to by the business just now? These questions fluster potential buyers and investors above all, but answers on them, sure, will be interesting to the salespeople. So...

Wave after a wave — not soon at home?

A situation is for today formed under act of the three basic groups of news: pleasant, not very good and quite loathsome.

First of them have touched timid hints that a world financial crisis, finding a bottom in summer months, shows the signs of slump at last. Of course, not at all Europe and even not America, but Japan and other «tigers» of the Asia-Pasific region will recover from it first. That will pass, at least, from eight to twelve months before an ebb will reach Ukraine.

But every cloud have its silver lining: investors from more happy (and more rich) countries of the world, dissuaded in the usual methods of capital`s maintainance, turn more keen attention to the so-called «developing economies» and now are ready to acquire assets in different industries here on near-bottom market prices.

The second group of news is contradictory enough and touches fears of the second crisis wave, which, in opinion of most experts, will be however stronger than first one. Nevertheless, such expectations compel the problem enterprises owners to be superfluous time thoughtful about an exposure them for a sale for adequate prices, and for the market — to react on the natural increase of the sale proposals by some (while insignificant) declared prices declination.

Such reports force the potential buyers to hurry up with the correct decision acceptance — to be in time, because otherwise a new owner will have already to reanimate the purchased enterprise in place of supporting business-therapy. Certainly, even the cost-effective business price can go downafter the second crisis wave, however the expenses on his renewal to the acceptable profitability level certainly will grow much more.

And, finally,the third, the least pleasant group of news is related exceptionally to internal Ukrainian realities (above all — to the forthcoming presidential elections) and threatens especially the medium-size and small business. If the big business «just» will change ownersas a result of next power redistribution in the country, and will be never pushed to the bankruptcy, their less business-colleagues in most industries could expect a very dark times. At first — five-month tense expectation of presidential race results (with fears of loss of connections, «roofs», etc.) and then (in February-April, 2010) the sharp changing of owners(and almost for certain — at far not market price) or... slow but faithful asphyxiation.

However, for some types of business (mass-media, outdoor advertising, printeries etc.) the forthcoming political campaign уже has already began to bring a perceptible additional profit in July-August. This tendency, by the way, at once found the reflection at the operating business market: the amount of the proper enterprises, offered for sale,went down sharply, and the prices for them grew notedly.

And now let us see the market dynamics of the of the operating business sales during the last «vacation» season.

Leaders changing

The Results of the marketings researches, conducted by the InterCredit`s specialists in June-August-2009, distinctly show the quantitative and structural changes at the operating enterprises market .

As InterCredit has already reported, on the summer beginning the trade enterprise yielded their leadership on the operating business market
to the small production companies. In the past three months they succeeded to keep the palm of championship, besides their stake at the market continued to grow — 30% to beginning of September in place of 29% in May (23% — at the end of January, 2009).

The majority in this segment is still presented by companies, related to the building business — stone careers, mini-factories producting of concrete and blocks and other building materials, work shops for the building constructions production etc., however the sale proposals of the light (sewings, etc) and chemical industry enterprises substantially rise by the end of the summer.

As for the food producing, the spring splash of the such business sale proposals by the end of summer practically dwindled into the nothing, that could be explained by the good harvests of most agricultural cultures and sufficient load of the processing enterprises (except the sugar, meat, milk and dairy producers). Beginning to bustle forward, it should be marked, that exactly due to the last indicated companies, the offered for sale assortment of the agricultural enterprises was notedly filled up at the beginning of the autumn – up to 9,5%, on comparison with the stable 8% (from January till May).

The retail trade nets and the separate point-of-sale of the food and/or other stuffs (including domestic chemistry), are on the second place still. However, the active market redistribution, beginning in spring-2009, and tendencies of the big foreign players coming into the Ukrainian retail market, led to the further reduction of such sale proposals stake at the operating business market — down to 21% by the end of August as compared to 26% at the end of April and 32% in — January-2009.

The last three months at the operating business market were characterized by the stable growth of the sale propositions, more or less related to the car business (point-of-sale grounds, car maintenance workshops, autowashings etc.), the owners of which had no support of big autoproducers and justly did not hope to live so long up to 2010 year — when the autosales revival is expected – on a background the further oil prices falling tendency and some credit system renewals.

The amount of such proposals grew from 12% in January, to 14% in May and, in spite of relative calmness during the summer vacations, saved this growth up to nowadays — 15,0% in the end of August. On separate groups of this segment sale proposals are distributed as follows: car-care center — up to 41%, transportations — about 30%, specialized point-of-sale grounds and car shops — up to 13%, car refuel stations (both separate and networks) — about 12%.

The number of the service sphere enterprises (different sort of agencies, pharmacies, vending, consulting firms, etc.) proposed for sale, grew slowly, but truly and in September reached 12,0%, as compared to 11% at the beginning of May and 9% in January. The tendency of their assortment broadening was saved as well (and even increased some) due to companies, incorporated in September-November, 2008, which had time to get all necessary necessary licenses and other business documents, but even did not start their work really (not about to earn money).

After the summer vacations period was over, a careful (10% as compared to 9,5% in May and 9,0% at the beginning of February) tendency was set to growth of entertaining and recreation sphere business-objects for sale — cafe, restaurants, mini-hotels and recreation bases. This situation has been formed by the two main factors.

Firstly, the general «crisis» declination of holiday-makers stream, resulted that the Azov and Black Sea coast resorts (and even the «gold» South bank of Crimea ones) loss from 12 up to 20% permanent clients even in a high season/ Secondly, an early (from the end of July already) temperaturedropping spoiled holiday-maker`s mood and owners financial plans as well.

The sale propositions number of so called high-tech business (internet-clubs, WEB-shops, etc.) for indicated period grew short from 2,5% down to 1,5%, what could be explained with comparatively low charges on their maintenance and stable demand (even in the crisis conditions) for the WEB-sold services.

Geography and prices

The sale proposals geography of the operating business, did not suffer by the special changes for the past three months, as well as on the whole from the beginning of year.

As well as before anymore all 26% of the operating business-objects are proposed for sale in Kiev and in the Kiev region (in April this index was about 28%). A South-East (22%) and South (20%) of Ukraine follow further. The same, point-of-sale and recreation objects prevail in the South regions, and the production constituent of small- and medium-size business is traditionally strongly presented in industrial South-East.

The basic, though itself not considerable changes, had place in the Western and Central regions, where the operating enterprises sale proposals grew on still. In the West it made 16,5% in place of 15,6% in May and 13,8% in January, and in Central areas — up to 15,5% as compared to 13,4% in May and 10,4% — in January.

Prices of the business-objects are varied in a wide range, depending on the business orientation, region and enterprise state. The record prices remains for big hotel complexes (for example 15 000 000$ in Kriwoj Rog city) and recreation bases in Crimea (in Crimea (for example, recreation complex in Nickolayevka — 13 750 000$). Mini-hotels and resort domestic type hotels in Sonth and Western regions are approximately in one starting price category: Sudak (Crimea) — 1 250 000$, Kirillovka (Azov sea) — 1 600 000$, Truskavets — 2 000 000$.

As for other objects, InterCredit company specialists fixed the real prices as follows:

Production enterprises — from 1 500$ (mineral water factory), up to 7 500 000$ (bread factory).

Trade — from 36 000$ (floral shop in Lvov) up to 650 000$ ( in Lugansk).

Car business — from 500 000$ (Car service), up to 1 900 000$ (business оf commodity concrete transportation in Kiev and Kiev region).

Restaurants, cafe — from 30 000$ ( cafe in Kievе), up to 1 000 000$ (cafe network in Kharkow.

High-tech sphere — from 3 000-5 000$ (WEB-shop), up to 370 000$ (equity participation in the mobile content production).

So, operating business market in Ukraine today still remains the buyer`s market, and costs of the most operating business types, offered for sale, shows a tendency to diminishing.

It takes place on a few reasons. At first, a speculative constituent disappears from the cost of business. Secondly, real estate prices (i.e. for tangible assets) continue to fall. And, finally, purchaser demand and profitability of enterprises grow short, and the commercial risks increase considerably.

A potential buyer or investor needs only to choose an appropriate moment between the crisis waves and catch a good price near the bottom — independently or with professional
financial consultant`s help.