How Many Private Businesses are for Sale in the UK?

Significant numbers can lead you to think that your perfect target for sale is ready and waiting for you, yet the chances are that your ideal acquisition will be much harder to find. From the research conducted for this article, it is our belief that to maximise your chances of acquiring the ideal business, you need to look beyond businesses currently for sale.

From experience we knew that only a small proportion of active businesses were for sale, but we didn’t have an accurate figure. As usual, given our desire for thoroughness, we wanted to drill down into the numbers. So we set out to answer the question both we and our clients often have: what proportion of private businesses are actively for sale?

The Layout of the Current Business Acquisition Marketplace

We began by splitting the market into two sections: Originators and Aggregators.

Originators are professional firms such as sale advisors or accountants who are directly instructed by a business owner to sell the business on their behalf. Large originators may have as much as 1,000 businesses on the market at any given time, whilst the smaller boutique operations will only take a much smaller amount at any one time.

Aggregators are places where businesses available for sale are collated, often websites, allowing you to search through listings to discover opportunities. These businesses are a mix of originator listing and direct sale opportunities from business owners. They’re seen as the online marketplace for businesses.

There is overlap, so we will need drill down a little more into the information behind the numbers to be able to calculate our final figure:

Businesses listed with aggregators

+

Businesses with originators that aren’t on aggregators

=

Total businesses for sale

Businesses Listed with Aggregators

From our market research, we discovered seven main aggregators of businesses for sale which list more than 1,000 different businesses for sale. However, we also knew that business owners and originators post their opportunities to more than one aggregator. This means that we also needed to account for the overlap between them to ensure we were not double-counting.

Of the seven aggregators there is one with the greatest listing number, with approximately 26,000 active UK businesses marketed for sale. If we assume this ‘market leader’ is the first website that businesses will list with, which is why it has the most businesses for sale, then we need to quantify the overlap and how many listings are actually unique to each site.

Understanding there is an overlap, we then compared the other six identified aggregators with the market leader. We took representative random sample business lists from each of the other six aggregators, and calculated, within reasonable confidence limits, the amount of unique deals on each site.

The results were surprising, with many more duplicate listings than expected:

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Therefore, after taking into account the crossover, we can confidently estimate that approximately 37,000 businesses are currently listed on aggregators.

Businesses for Sale, not Listed on Aggregators

Market research we conducted on private businesses sales in 2013 indicated that there are approximately 400 originators in the market, ranging from niche operations selling a few businesses, to much larger international firms working on several hundred deals at any one time.

We researched the originators to discover how many UK business deals they currently are actively engaged by or marketing. We discovered the 10 largest had over 200 opportunities each, with the largest having close to 7,000 active opportunities. The average, outside of these top 10, was approximately 30 live opportunities.

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We have therefore estimated that the number being marketed by originators is 25,000 businesses.

This figure, however, includes businesses that are also listed with aggregators, therefore we need to adjust for this too, before we include it within our calculation.

The 25,000 figure is made up of businesses of all sizes, signed up with a wide variety of originators. In our research we discovered, through sampling, that the majority of the largest 10 originators list all their businesses, whilst others, predominantly those who deal with medium sized businesses and above seldom do. Using the data we gathered from this, we estimate that 12,000 businesses are not listed on aggregators.

We have now calculated the two constituent elements of the equation we outlined earlier.

37,000 Businesses on aggregators

+

12,000 Businesses with originators that aren’t on aggregators

=

49,000 Total businesses for sale

So, What Proportion of Businesses are Actively for Sale?

Statistics from Companies house from June 2016 stated that there are around 3.5 million active and operating businesses in the UK. Comparing this with our estimate we see that only 1.4% of the businesses in the UK are formally being marketed for sale.

Of course there are other companies which may be active but an integral part of other businesses and therefore not saleable, there are also businesses which are primarily used as a vehicle for a consultant to sell services, but even taking these exceptions into account, we can safely estimate that 98% of privately held businesses are not for sale.

What This Means for the Business Buyer

If you are looking to acquire and only looking on market, whilst you are searching the easiest transactions, it is limiting. With this approach you are significantly restricting your search and discarding the opportunities that lie within the 98% not for sale.

A recent illustration of this is when we were approached by a niche company looking to acquire in their specific sector in March 2016. We first searched for businesses which were actively for sale, and we only found one near match and one more distant fit. Whilst they did engage the near match, it was not a good enough fit to be a priority. However, with off market activity we have experienced much greater success; we targeted seventy two opportunities who fitted their precise search criteria, of which they are in advanced discussions with six of them.

What we can certainly say is that in this instance, without the off market searching activity our client would have given up some time ago. Yet approaching off market businesses has yielded much greater results, both in terms of quantity and quality. We have confidence that one or more deals will be completed in the next few months.

This case does support the evidence above, as do the experiences of other clients of Firm Gains.

So, Full Market is the Way if You Want Success

Without a doubt, to maximise your chances of covering the entire market, to find the right acquisition and to have the chance to achieve a successful company acquisition, you need to look both on and off market.

This is a significant undertaking though. Searching, approaching, qualifying and securing off market opportunities needs much more time and resources. It is a specialist skill and business leaders benefit from seeking help not only in the searching, but also through the negotiation, due diligence and completion. However the benefits are significant – particularly when only 1 in 50 are available for sale.

So, when it comes to looking to acquire a business, then speak to the independent experts at Firm Gains on 0333 050 8225. We can help with on and off market searching and can help you get your acquisition strategy right.

Estimation notes

• Business owners who don’t use an aggregator or an originator are few and far between, and so are statistically irrelevant in this research as they are not necessarily considered ‘marketed for sale’

• Our confidence limits with this estimation are +/- 10% which means that we can safely take the 98% figure as being within reason accurate