The Q4 global stock market correction is great news for owners of privately held companies. 2019 could be a critical time to sell a privately-held business, here is why.
1. The $90 trillion pool of money is once again on the move looking for returns.
2. Growing sentiment calls for slower growth and more economic uncertainty.
In April 2008, This American Life broadcast one of their best shows ever: The Giant Pool of Money. It won a Peabody awards and was widely hailed as one of the best explanations of the cause of the 2007 economic collapse. The basic premise was that there is a giant pool of money (then $70 trillion) that is constantly looking for investment return. That pool of money fueled the stock market boom and crash of 2000 and mortgage debt crisis of 2007.
Since 2008, low interest rates have driven that pool of money into global equities markets and driven the 10 year bull market that appears to be ending. In that time, the giant pool of money has grown to more the $90 trillion and it needs to be invested.
Some of those funds will move into debt securities but they do not offer the rate of return demanded by that giant pool of money.
So, this pool now turns to privately held companies to provide the returns it needs. IBEX expects to see a strong surge in business acquisitions by private equity groups, family investment groups and high wealth individuals. IBEX also expects to see corporations increase investment activity as they seek to overcome slowing organic growth through acquisition.
Couple the giant pool money with growing economic uncertainty and 2019 looks like a great opportunity to reap some rewards.
Valuations of privately held companies will benefit from the economic successes of the past few years. However, with growing uncertainty about the economy in 2019 and 2020, those values could suffer from profit slowdowns or reversals.
If you are a business owner who has any interest in selling your business or bringing in investment partners in the next 5 years, 2019 looks like a promising window.
Owner / CEO