Are you prepared?

12 million baby boomers own businesses and will need to do something with their companies during the next 15 years. Let’s assume that 40% of them close the doors of the business or turn the keys over to the kids/employees. So that leaves us with about 7.2 million that will seek buyers of some sort. And we will divide 7.2 million by 15 years = 480K businesses per year will hit the market. If you are more conservative (and assume that baby boomers will work even longer) dividing 7.2 million by 20 years, you still have 360K businesses entering the market per year.

Last year, according to Dealogic, in the U.S. 10,597 closed M&A transactions were announced – and probably three times that amount were simply not announced at all. So that means roughly 32K companies changed hands. How does 32,000 compare to 480,000 or even 360,000? Well simple math tells us that 480K is roughly 15 times larger than 32K, and 360K is 11x larger.

Simply put, the glut of baby boomer businesses hitting the market will swamp and overwhelm the buying community. A 15x or 11x increase is far too large for the M&A market to handle. And I kept the math simple and linear. In reality, the number per year will most likely increase every year, especially in the latter years of this 15- to 20-year window as age and illness force more and more aging baby boomers to hit the market.

Hopefully you can now see the dangers of waiting too long. This is a HUGE and looming issue that Generational Equity is quite concerned about. Why? Because if the data is correct and very few business owners have enough liquid assets saved for retirement, AND they are counting on the proceeds of their business to fund them for years to come, AND millions seek to do so at relatively the same time, we could have a retirement disaster brewing in this country.