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Case Study: Sydney IGA sells for Record Turnover Multiple

Case Study: Sydney IGA sells for Record Turnover Multiple

Sale Statistics
Sale Date: 1 July 2013
Agent: Elizabeth Krienke (Licenced in QLD, NSW, NT – In her 8th year working with Aussie Supermarket Brokers)
Annual turnover: Approximately $3,086,781 (Inc GST)
Sale Price: $1,270,000 + Stock (Approx. $160,000)
Turnover Multiple: 21.4 times weekly turnover (Inc GST)
Time to sell: Agreement on price reached within four (4) months and settlement just under 6 months from business being put on the market for sale. Three other offers to purchase were also presented to the Sellers within this period of time.
Buyer Relationship: Elizabeth had been speaking with the buyer for approximately 4 years prior to this sale. During this time the buyer had investigated 17 businesses. Our database shows 461 separate interactions with this buyer over time (phone calls, email, marketing contact and inspections etc.)

“Sometimes as an agent you list supermarkets such as this Sydney IGA above what the market data justifies. Your intuition tells you it is something that the market will pay a premium for” said supermarket broker Elizabeth Krienke. “The location, existing competition and great plant and equipment were all things I knew would appeal to Sydney buyers. Additionally I could see that experienced operators could make minor changes that would improve the turnover and profits in the business. I knew I was on the right track, when just a few days after listing, one of my supermarket buyers put forward a price of $1.2M + stock.”

Elizabeth was visiting independent supermarkets in Sydney when she met Tom Smith*, owner of the suburban Sydney IGA. Mr Smith had owned the store for ten years and previously had owned and run a fruit and vegetable business. Although when she visited, he was not thinking of selling, shortly afterwards he decided it was probably a good time to retire.

He’d been offered a deal by another IGA operator, in fact he was offered two years’ income by the other operator, but he knew that the store was worth more, so he gave Elizabeth a call and decided to list the business with Aussie Supermarket Brokers (ASB).

“Mr Smith was adamant that I was selective in terms of whom I spoke with about his business and I kept this mind throughout the whole process. We decided to use our existing, qualified buyer contacts rather than spending a huge amount on advertising.” said Elizabeth.

As soon as the store was listed, the ASB marketing machine swung into action and the store was promoted within their extensive internal database of qualified supermarket buyers. Mr Smith had already prepared all the financials and provided these to ASB. Between incoming marketing enquiries and calls to Elizabeth’s pre-qualified buyers, she kept Mr Smith informed of progress. Within a four month window several offers were provided to the seller and the end buyer was identified.

The supermarket sold for a substantially larger sum than Mr Smith had been offered before – in fact the store sold for 21.4 times weekly turnover.

“Mr Smith’s 530sqm store had been very well kept and showed good financials. I was confident that we would find a buyer at the selling price that Mr Smith was asking for, and not only were we able to find a buyer, but we were able to do this within a relatively short timeframe.” said Elizabeth.

“I was very happy with the way that Elizabeth handled the sales process. She kept me informed and introduced me to a large pool of qualified buyers interested in acquiring my supermarket. I know that Elizabeth also made sure the buyers were prepared for meetings with head IGA and the landlord which were important in getting the sale through.”

Mr Smith is still helping the new owners at his old store, working with them two days a week, but is looking forward to spending some much needed time in his garden soon.

Elizabeth indicated that whilst you can’t always achieve prices above market, by talking to a specialist like herself you can quickly get an indication of what your supermarket may sell for.

*Not his real name. Precise details of the store location and the vendor have been kept confidential.

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