Businesses over R30m in demand

Cowell recently facilitated a transaction for the sale of 60% of Tiletoria in Paarden Eiland, Cape Town, to Invicta Holdings. The Tiletoria business - including the commercial premises - was valued at R76 million.

Comments Cowell: "Tiletoria is one of the most efficient operators in the market, distributing to the retail and wholesale market, as well as property developers, and Invicta Holdings are well placed to further grow the business.

"While buyers are showing a strong appetite for businesses above R30 million, these are not as readily available as smaller operations in the R5-R15 million price range. However, as the latter are generally not asset rich, or often are over-priced, they experience difficulty in attracting buyers. There also tends to be an unrealistic expectation among these sellers, who perceive a higher value in the business than is achievable. Our focus is in providing the professional capability to assist sellers in preparing their businesses for sale, and buyers in sourcing suitable, profitable and well-run businesses. With an increasing demand for our services nationally, we are looking to expand our operation in Gauteng and also beef up our resources in Cape Town."

Trend towards in investing in businesses

Cowell says buyers are mostly South Africans, however more recently, overseas buyers have expressed an interest. "These comprise private equity funds, competitors and listed companies as well as individuals looking to escape the corporate world. At the moment we have several overseas buyers looking to invest between R100 million and R200 million. Currently we are seeking buyers for a R40 million brickworks situated just outside Port Elizabeth and a large manufacturing business in Cape Town, as well as negotiating a transaction of USD7.5 million for a wholesale/retail business in the Seychelles with a Middle East buyer.

"As a general trend, we've noticed that following a major movement into investment in the property market, there's now a scarcity of available commercial property. As a result these investors are now considering other opportunities such as businesses, particularly those which include a property element - in which case the intrinsic sound value of the property further enhances the investment potential," he says.

He adds that these days the sale of 100% of a business is becoming increasingly rare, mainly for two reasons. "Firstly there is usually a need for skills transfer, as in a BEE transaction, and then in regard to those who invest private equity in a business, they want management to remain with a stake in the business."