Despite a lower number of businesses offered for sale, private business values were relatively stable in the final quarter of 2010, according to the latest BizExchange Index.
BizExchange chairman David Bird said there are reasons for optimism in the months ahead, including some increase in business lending by banks and the rising impact of Asian markets on Australia.
That noted, the report said current levels of economic uncertainty, and the caution that engenders for every player in the game, suggest the Australian economy will be relatively flat for the next six to 12 months, and that business values are unlikely to improve noticeably in that time.
Most of the decrease in listing volume for the fourth quarter was attributed to businesses with lower ratios of earnings before interest and taxes. Bird said 70% of all listings still have an EBIT ratio of less than two. This may be explained by owners of small retail and hospitality businesses holding on for Christmas sales and hoping for an upturn in the New Year.
In addition, the construction industry will be active in rebuilding houses and infrastructure after the Brisbane floods and the damage caused by Cyclone Yasi.
The BizExchange index report said predicting movements in business values isn’t getting any easier, thanks to conflicting forces in play. Examples:
- Australian equity markets are wavering after recovering quickly from the global economic crisis, but confidence about small listings is still tentative.
- Property prices seem to have stalled, stopped by increasing interest rates.
- Changes to Australia’s immigration policy has encouraged investment by wealthy immigrants, which may dampen property prices and private-company values.
- Volatility caused by the decreasing influence of the United States and Europe and rising influence of Asia on the world economy.
Over the past year, businesses in the finance and insurance industries suffered dramatic drops in revenue, while the agriculture and mining industries enjoyed steady growth, according to the report.
Bird added that we may soon see a shift in emphasis in investment and banking emphasis from residential housing to businesses.
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