A steady uptick in the business real estate sector – those buying and selling a business – across the Greater Lehigh Valley indicates a more active market with area professionals optimistic that the trend has gained sufficient traction to continue.
“The marketplace is different since the economic downturn and recovery. For a number of years [since 2008], people were not doing anything,” said Paul S. Frank, an attorney with King, Spry, Herman, Freund and Faul LLC. Frank is based in Bethlehem.
Frank said while the pace has quickened in the business sales marketplace – and the brisker activity is expected to continue – getting financing for business loans has become more difficult.
While Frank said there are no obvious changes or pending legislation relevant to buying or selling a business, more subtle shifts include continued lender caution and the “nature of the business and the sophistication of the buyer” with respect to how businesses change hands.
Sellers, too, may bring various motivation to the table, depending upon whether or not the owner has the ability to pass down a business, if it’s a family owned and operated firm or if the seller is looking toward positioning the company so he or she can retire.
These days, it generally takes more than a handshake to close a deal on buying or selling a business, according to Frank.
Frank said potential buyers must come to the table armed with a well-made business plan, along with credentials.
“I think it’s a cyclical thing,” he said. “Back in the 1970s and 1980s, people signed off with handshakes then. That’s not something that happens now.”
Frank said while the dynamic, review and lending requirements are harsher now, the process also is less personal.
“Smaller regional and local banks may be less willing to lend for larger projects,” he said.
“Preparedness and due diligence [for the buyer] have become more and more important. It’s about having your ducks in a row,” Frank said.
Frank recommended a business “self-exam to [look for] holes and issues to position the business for sale. That self-exam could include hiring a third party for review or consultation.
Jeffrey Berdahl is a partner with Regan, Levin, Bloss, Brown & Savchak PC Certified Public Accountants based in Allentown.
According to Berdahl, baby boomers could account for a new wave of business buyers, especially those interested in trying something new or out of their area of expertise.
“Corporate franchise opportunities provide an [easier] way to buy a business because systems and marketing are ready to go,” Berdahl said.
And with social media connecting greater scores of people, old-fashioned, old-school networking still remains a viable way for buyers and sellers to connect, he said.
“Networking groups and professional organizations, like bankers and accountants, might be good resources for those looking to buy or sell a business,” Berdahl said. “A lot of that comes through who you know.”
Berdahl said there is more of a flurry of activity during the past year or two with business ownership transfers.
“We are seeing a lot more volume especially in the small to mid-sized businesses, but it’s not always an easy deal to make with the bank and financing,” he said.
Allentown’s revitalization, including the opening of the PPL Center, home of the Lehigh Valley Phantoms minor league hockey team, this fall is another reason for new business and investor excitement.
The area known as the “Allentown area zone” also includes planned new office complexes, as well as the opening of Two City Center in March, the first of the commercial projects realized in Allentown’s Neighborhood Improvement Zone. Two City Center is the new headquarters for National Penn Bank.
“A lot of lenders [now] scrutinize transactions and are not as free with their lending,” Frank said. “To acquire a business, the message is: Do your homework before signing an agreement. Learn as much as you can about the business and its assets.”
According to Frank, the Allentown redevelopment could spark increasing interest alongside or surrounding the redevelopment area.
“Even among small-business [owners], they’re looking at making more investment there,” he said. “Since 2011, people were cautious but there is more energy in the marketplace and enthusiasm, especially in Allentown.”