Business sales are up by 6% nationwide as the market is seller-driven for the first time since 2020. Photo / 123rf
Business sales are up by 6% nationwide as the market is seller-driven for the first time since 2020. Photo / 123rf
New Zealand is officially in a seller’s market as record demand for business ownership drives valuations higher, according to a new report from ABC Business Sales (ABC).
ABC’s Quarterly Market Intelligence report, covering the fourth quarter, reveals that business sales are up 6% nationwide over the last 12 months.
Theincrease is largely attributed to new migrants, particularly from India, the Philippines and China, who prefer business ownership over salaried employment, and former corporate employees who have been made redundant and seek to secure income differently.
Buyer demand is also at record levels, increasing by 39% in the year to December 2024 compared to a year ago,with 23,750 potential purchasers signing confidentiality agreements.
Interestingly, despite rising business sales, average business prices declined by 8% over the last 12 months to $781,390 and dropped 11% quarter-on-quarter. The report explains the drop is likely attributed to a higher volume of sales below $1 million.
The number of businesses listed for sale on Trade Me fell by 14% year-on-year, with ABC’s website also shrinking in new listings by 1%.
ABC Business Sales managing director Chris Small said the findings show there’s no sign of the market slowing down.
“The early signs for 2025 suggest the surge in signed confidentiality agreements will continue as we had a recorded week of 700 ECAs in late January and we have not yet experienced any increase in new businesses coming to market to be sold,” Small said.
“The imbalance between demand versus supply is getting wider and that will continue to put the sellers in the box seat when it comes to negotiations and at what price businesses transact.”
ABC Small Business Sales managing director Chris Small.
Despite the average business sale price declining, business valuation multiples have risen by 7%, indicating that strong demand and a smaller pool of businesses for sale are keeping values stable.
The report explains that key factors keeping multiples high are record-high demand for business ownership (driven by strong migration), falling interest rates and supply constraints.
Importantly, for the first time since ABC began reporting, New Zealand is officially in a seller’s market, with the current ratio being an average of 32 buyers per new business listing. Any ratio greater than 30 indicates a seller’s market.
One sector that has been hit particularly hard, however, is hospitality. ABC reports that the average sale price for hospitality businesses fell by 8%, reaching its lowest level since 2020.
Most transactions for these businesses are under $300,000, driven by migrant buyers with limited budgets and the ongoing economic conditions which have seen a shift toward smaller transactions.
Looking forward, ABC is predicting the seller’s market to strongly take hold in 2025. It expects business valuation multiples to rise by 7-9% annually and to see a roughly 1-3% increase in the number of businesses entering the market.
Most interestingly, ABC is predicting signed confidentiality agreements to grow by almost 30% to 30,600 per annum as new listings grow by 2% to 765, representing a buyer/seller ratio of 40.
