Now is a good time to buy a business, experts say. Photo / Getty Images
Competition is heating up in the Bay of Plenty's commercial property market as returning Kiwis eye up business opportunities before the borders reopen.
The trend is being driven by historically low interest rates, the impact of Covid-19, and the borders reopening.
Bay business brokers say hospitality, home furnishing, service stations are in demand. Any business making a sustainable profit without being affected too much by Covid is a popular pick.
ABC Business Sales Tauranga business partner Linda Harley said her team had sold 14 businesses in the past three months across Tauranga, Rotorua and the wider Bay of Plenty.
"A further 11 are in due diligence currently, so the market is busy with buyers seeking quality businesses."
Harley said there had been a rise in people making "life-changing" decisions, particularly more Aucklanders wanting to relocate to the Bay or locals wishing to move into business ownership and away from being employees.
"The Covid events have certainly made people think more about their futures and make life-changing decisions as a result."
It was a good time to buy a business as historically low interest rates offered a great return on investment compared to other investments like property, term deposits or the risk of the sharemarket, she said.
"For those recently unemployed or wanting a change in direction, the opportunity to own a business gives them flexibility to move into new challenges and grow their wealth."
Harley said it was also a good time to sell as banks were still lending on profitable businesses, allowing buyers to invest in quality businesses.
"We have a large number of Kiwis returning to New Zealand who are looking to invest in business opportunities. This is keeping business values competitive, with multi offers presented on many of our sales.
"Multi offers are becoming more common as we seek more businesses to offer. It is currently a seller's market, which will optimise the price achievable in the current market."
Harley said some of the most popular businesses to buy were the "general business sector", including trades such as home furnishing and painting, service stations, childcare centres, and freehold investment property.
Hospitality businesses, particularly bars and restaurants, and medium-sized businesses with an ebitda (earnings before interest, tax, depreciation and amortisation) above $1.5 million were also popular buying options, she said.
Her advice to people who have bought a business in the past three months is to focus on their processes and the quality of service provided to existing and new clients.
"With rising costs, it will be important to focus not just on sales but what is happening with expenses to ensure any supply chain or staffing cost increases are managed well to ensure profitability is maintained."
LINK business broker Neil Cammell said it was a good time to buy a business as the borders reopened and Baby Boomers were wanting to get out of business.
"I still have got inquiries from people trying to get back into New Zealand and people looking for jobs, buying a business for a job and increasing their salaries.
"There are a lot of different reasons and it's all positive at the moment."
Cammell said it had been a tough few years and many people were looking at different ways of increasing their incomes.
There had been a rise in business sales across the Bay in the past few months, he said.
"At the moment I have got three that are coming for sale in the next month.
"Before that, it was pretty hard work. There was a lot of inquiry but people were unsure about what was happening with the Government, legislation, and the Covid effect.
"So people were interested but weren't moving forward. Now they are moving forward and making decisions."
Cammell said Tauranga was doing better than Rotorua because tourism had a bigger effect on that market.
But there were some good businesses on the market.
"We have had a lot of inquiries for the businesses we have got for sale at the moment.
"Any type of business that's making sustainable profits and hasn't been affected too much by Covid are selling well."
Tabak Business Sales directors Kevin Kerr and Paul Brljevich said it depended on the vendor or buyer's personal circumstances as to whether it was the right time to sell or buy.
Brljevich said someone might have just been laid off from a job, or it had always been their ambition to own a business, or a vendor might be reaching retirement age and had decided it's time to sell.
"It also depends on the business and where it is in the cycle. It's very industry-specific. Some businesses have done extremely well and it is a good time to sell. Others have had challenges, so it's maybe not the best time."
Brljevich said they sold 80 per cent of what they listed last year, which was well above the industry "norm".
"We are being consistently turning over businesses. But we're not only seeing mum and dad purchasers, we are also seeing acquisitions."
For example, if a corporate business based outside of Tauranga was seeking to increase profit turnover, instead of starting up a business here they were acquiring ones in a similar industry.
"We're seeing a lot more of that."
Businesses were now looking at their financials for the year, talking with their accountants, and getting appraisals to go to the market, he said.
"Our pipeline is looking good...
"I believe that good-quality businesses that are well marketed and well priced, they will always sell."
Kerr said many businesses countrywide were seeing Tauranga as a growth opportunity.
Coming out of Covid there was a lot of interest from corporate buyers who had time to reassess, Kerr said.
"Owning your own business does give you a lot more opportunity to have some measure of control in your life... and flexibility and opportunity to stamp your own mark on a business."
In his column last week, head of Private Wealth Research at Craigs Investment Partners Mark Lister said there has been a lot of corporate activity in recent months.
"It feels like we might have caught M&A [mergers and acquisitions] fever," he wrote in his column.
The local sharemarket also had a fair share of the action over the past year or so, he said.
Electricity company Mercury NZ acquired the retail business of Tauranga-based competitor Trustpower, healthcare heavyweight EBOS Group spent A$1.2 billion on medical device distributor LifeHealthcare, while Tourism Holdings is proposing to merge with its Australian-listed competitor, Apollo.
Real estate company Property Brokers has acquired a major commercial player as it expands its business across the region.
Ray White Commercial's Tauranga and Tauriko offices rebranded to Property Brokers on March 31.
Property Brokers has a team of more than 850 people in more than 85 locations. The acquisition of Ray White Commercial Tauranga further broadens the company's footprint and scale.
Property Brokers Bay of Plenty and South Waikato regional manager Simon Short said the expansion into Tauranga was the third branch for the company in the wider city.
Short said Ray White Commercial's Tauranga team were proven performers and have built "enviable business and reputation" across the city.
"We are excited about the expansion of our commercial holdings across New Zealand and in particular Tauranga City as it is a significant growth corridor for the industrial and commercial sector in New Zealand's North Island."
Property Brokers managing director Guy Mordaunt said it was exciting to be expanding and to be in a position where it was able to deliver more locals with its real estate services.
Under Philip Hunt's ownership, Ray White Commercial Tauranga has enjoyed a significant market share of Tauranga's real estate for years and was recognised as the Top International Branch for Customer Service for five years in a row.
Hunt, who has fully supported the move, said embarking on this new journey with his team was "wonderful" and he was excited to start this next chapter.
"The size of Property Brokers' infrastructure and associated networks is massive, and their marketing and network reach is something which I know our clientele will truly benefit from here in Tauranga."
This summer will be critical to discover if the sharks have started returning.