The value of Australia’s private businesses are stuck in neutral as the global economy continue to grind its gears, according to a quarterly study by a business marketplace firm.
BizExchange, in its index for the June quarter, says private business values are likely to remain relatively flat for the next six to 12 months.
Roadblocks to increased value include higher financing costs, tighter borrowing requirements and lower property values. The report also notes that even though Australia’s equity markets are recovering from the global crisis, investors remain tentative about jumping into smaller listings.
The volume of owners putting their businesses up for sale remained below the level required to transfer ownership from baby boomers to the next generation. Folks simply are putting off retirement. At same point, the report said, the buildup will bust loose, with a dramatic flood of businesses on the market.
BizExchange Chairman David Bird, whose company has been monitoring Australia’s private business values since June 2006, said the stasis wrought by the national election reflected the many conflicting forces that made predicting changes in private businesses’ values difficult.
“It appears the global financial crisis has had a much wider and deeper impact in Australia than originally thought,” Bird said. “As was the case with the 1987 stock market crash and the property crash in the early ’90s, unrealistic valuations and excessive leverage has been extensive.”
Bird also said the Australian economy’s increasing reliance on mining can only extend the nation’s reputation as a one-trick pony: “Australia again runs the risk of being too one-dimensional — moving to reliance on the quarry from that of the sheep’s back. An industry policy that has a wider perspective is long overdue.”
“It really is amazing that the current government has wasted billions on dubious programs and has simultaneously cut back export market development grants costing in the low millions.”
Image by Ludovic Bertron