'I'm done': Pandemic memories push business owners toward the exit

For advisors with business-owner clients, the exit conversation may be coming sooner than planned. Wilmington Trust's Marguerite Weese says lingering memories of the pandemic are pushing owners to cash out now that their businesses are "back where [they] should be." 

The COVID-19 pandemic and the resulting lockdown sparked the deepest economic downturn in the U.S. since the Great Depression. The COVID era saw unemployment surge and sparked the highest recorded single quarterly decline in real GDP, according to U.S. government data.

Research released in 2020 by economists David Cutler and Larry Summers put the total cost of the pandemic at more than $16 trillion, or approximately 90% of America’s annual GDP. Building on that research, a 2022 analysis by the Institute for Progress estimated the cost as somewhere between $10 trillion and $22 trillion.

Pandemic pain lingers

Six years later, many business owners, having successfully navigated the mass upheaval of the pandemic, are now ready to call it a day, according to Wilmington Trust’s Weese.

“I am surprised by the number of business owners right now who I think are willing to cash out and to sell because I think a lot of people still remember going through the pain of COVID, depending on their business, if that was not a good season for them,” she told InvestmentNews. “So they're saying ‘things are back, I don't know what the next hiccup is, but I feel good and I'm done’.”

“If there's a number out there or they're saying I finally got my value back, I feel really good, I know the number that I want to be able to retire on, and now I just want out,” Weese added.

Wilmington Trust, which is the wealth management arm of M&T Bank, had about $99.9 billion in active AUM as of June 30.   

Owners eyeing retirement

“We're having a lot of conversations either because somebody got approached with a number or somebody's feeling like, 'I'm tired',” Weese said. “'I just got my business, you know, back where it should be, and now I want to enjoy retirement'.”

Unsurprisingly, succession is also influencing these decisions, with owners’ children and grandchildren not always willing to take businesses over. “[The] next generation … maybe doesn't want to take the business, and so [owners are] selling because they were waiting to see if their child wanted to take the business,” said Weese.

However, recent data suggest that owners could still face headaches as they look to exit their businesses. Research released by BNY Wealth earlier this month said that, while private business owners are seeing a receptive deal market, just under 50% of sellers are either somewhat or very well prepared when buyers start reviewing the deal.

Wilmington Trust’s Weese said that a key factor in businesses’ exit strategies is that many heirs are unwilling to deal with the pressures they saw their parents or grandparents deal with. “The child may say, I just saw what you went through and I don't really want to do that,” she said.

Generational attitudes shift

That reluctance tracks with broader generational attitudes toward work. A 2023 survey by Georgetown University and Bank of America of 1,032 Gen Z and younger millennial workers found that flexible schedules and paid time off rank among the top factors in where young adults choose to work, priorities that don't always square with running a family business.

For advisors, the combination of motivated sellers, unwilling heirs and underprepared deals points to a clear opportunity: start exit-planning conversations early, confirm whether a family successor is realistic, and help owners get their financials and deal documentation in order before a buyer comes calling with a number.