[EP 261] Unlocking Business Value: Understanding Trends, Valuation and the Power of Data with Richard Hemingway

Connect with Richard Hemingway

• • • Connect with AIBB
    • Richard on LinkedIn
    • Bizstats

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[EP 140] All about Bizstats – statistics for business valuations

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iTunes: https://podcasts.apple.com/au/podcast/the-deal-room/id1267098895

Transcript below!

Note: This has been automatically transcribed so will be full of errors! We are not providing it to you as a word-perfect version of the podcast but just as an easy way to provide you with a different way to be able to scan for information that might be relevant to you.

Joanna:

Hi, it’s Joanna Oakey here, and welcome back to The Deal Room Podcast, a podcast proudly brought to you by our commercial legal practice, Aspect Legal. Today, we have the fabulous Richard Hemingway talking to us about a lot of really important and interesting information coming out of the Bizstats database and from his own experience in the market in relation to the state of the market and valuations. Richard talks to us today wearing many hats, and we’ll discuss the many interesting statistics he has drawn out of Bizstats data and his other exposure in the industry. This is quite an interesting episode where we dig into various market changes and some interesting statistics. So buckle in. Here we go with our discussion with Richard Hemingway.

Excellent. Richard, a huge thank you for coming on to the podcast today.

Richard:
Oh, it’s great to be here. Again, Joanna, it’s been a while, hasn’t it?

Joanna:
It has been a while. So excited to have you back. Now, of course, you’re here today talking from a Bizstats perspective, but you wear so many hats. Like, I feel it’d be useful for our audience to get a bit of background from you, as to these multiple hats you’re wearing. So they have an idea of the perspective you’re coming from today. Thanks.

Richard:
Joanna, yeah, any conversation with me don’t get far without mentioning Bizstats. I’m fairly passionate about it. Absolutely wearing the Bizstats hat today. It’s such a great tool, but we’ll get into that shortly. I’m the founder of the Manadancx Group, an m&a advisory, and business sales company that started in New Zealand, was living there, about 10 years ago, and grew to have operations in Australia, Indonesia, and Singapore. We’ve also spun off a finance brokerage, Ex-Finance, that operates here in Australia. More recently, I’ve merged my business here with Blue Mountain Capital, a mid-market investment bank with a deep pedigree in the market. And I’m now the CEO of the Blue Mountain business in Sydney. So with all those hats, I’m a busy, busy boy all the time.

Joanna:
So many hats, Richard, so many hats. Okay, all right. Well, let’s just get into the state of the market and the information coming out of Bizstats and any other data you have access to. So what are you seeing in the market? What are some of the trends?

Richard:
Yeah, thanks, Joanna. Well, it’s interesting; we’ve certainly had a brisk start to the year with over 400 sales going into our business database in the last year. This shows that there’s more traction for Bizstats as a tool, and brokers in the market are actively using it. Within the Bizstats data, I’m seeing an increase in the size of the businesses being entered into the database. The average turnover for businesses sold in the last six months was over 1.1 million, which is an interesting lift. We’re also seeing more multimillion-dollar turnover businesses, leading to increased deal sizes. The database itself is gaining great traction, and I want to emphasize the importance for active brokers in the market to join the AIBB and contribute their sales data. We’re also seeing multiples in the market sitting around 3.5 times EBITDA, which is a strong bounce back from what we saw during the COVID times. Intangible assets are also playing a significant role, accounting for around 70% of total sales value.

Joanna:
Fascinating, really interesting insights. And are there any industries that are showing more activity or stronger performance?

Richard:
The hospitality industry has come through a rough patch during COVID, but it has bounced back quite strongly, showing a lively transaction flow. On the other hand, some services businesses are trading very well.

Joanna:
Is there anything from the data that surprised you or stood out unexpectedly?

Richard:
Yes, the number of lower middle market businesses transacting has increased significantly over the last six months, which is a change in activity for ARB broker members. Also, the strong component of intangible assets within businesses’ makeup was somewhat surprising, but it highlights the key component of value that buyers are investing in.

Joanna:
Interesting findings. Now, moving on to valuation trends. Have you seen any changes in valuation practices?

Richard:
Yes, the international valuation standards have come into force, which is a fantastic tool for values to use. They emphasize the use of market data and provide a framework for assessing intangible assets. Another trend is the potential inclusion of ESG considerations in business valuations. While this hasn’t heavily impacted the Australian market yet, larger transactions around the world are already incorporating ESG protocols. Additionally, the impact of AI on business valuations is an area to watch. While AI can create efficiencies in some aspects, there’s still a long way to go before it can fully replace the expertise and judgment of valuation professionals.

Joanna:
Indeed, AI’s potential and limitations are fascinating. Richard, you’ve mentioned the AIBB earlier, and access to the Bizstats database through AIBB membership. Can you tell us more about the benefits of joining and contributing data?

Richard:
Certainly. AIBB membership is crucial for access to the Bizstats database, which allows brokers to benchmark market data, gain insights, and assess business valuations more accurately. By contributing sales data, members can help grow the database and create a more representative tool for the market. This leads to more accurate pricing of businesses, helping both sellers and buyers to understand market expectations and ensure realistic transactions occur. The more data there is, the better it is for everyone’s interest.

Joanna:
Fantastic. Now, before we conclude, could you share how interested individuals can get involved with AIBB and reach out to you?

Richard:
Absolutely. For those interested in AIBB membership and Bizstats access, you can visit their website at aibb.com.au or email them at [email protected]. If you’d like to contact me, I’m very findable and always happy to talk. Feel free to give me a call.

Joanna:
Thank you so much, Richard, for being on the show today. It was a pleasure to have you back.

Richard:
Great to chat, Joanna. Always a pleasure.

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