Highlights From Q2 2016 IBBA and M&A Source Market Pulse Survey On Businesses Sold
Quarterly the IBBA (International Business Broker’s Association) and M&A Source put together the Market Pulse survey to gain an accurate understanding of the market conditions for businesses sold in Main Street (values ,$2M) and the lower middle market (values $2M-$50M). Below are a few highlights from the survey that was conducted by the IBBA and M&A Source with the support of Pepperdine Private Capital Markets Project and Pepperdine Graziadio School of Business and Management.
Why Owner’s are selling
#1 Retirement
#2 Burnout
#3 New Opportunities
Reason for Selling By Size
New Opportunity
<$500K
$2M-$5M
Burnout
$500K-$1M
$1m-$2M
$5M-$50M
“If we dig deeper into the numbers we see that sellers are two or three times more likely to sell because of burnout than health issues. Obviously that’s a concern because burnout doesn’t happen overnight. By the time you decide you don’t have the energy or ambition anymore, your business is probably already feeling the downward effects. There’s a difference between sprinting across the finish line and limping across, and business values reflect that.”
- Strongest Growth in businesses selling that are valued at $5M-$5M
- Buyers market for businesses valued under $1M, over the $1M mark is a Seller’s market
Multiples of Value Trend
2016
Q2 Q1
<$500K 2 2.3
$500K-$1M 2.8 2.8
$1m-$2M 3.3 3.0
$2M-$5M 4.0 4.0
$5M-$50M 5.1 5.5
Cash at Close and Seller Financing
Sellers continue to get the majority cash at close. In this quarter, owners got 76% or more cash at close with the majority of the balance being seller financing, along with some earn outs to close the valuation gap. Seller financing amounted to at least 10% of financing across all market segments.
Top Industries By Market Sector
<$500K Restaurants Personal Services Consumer Goods
$500K-$1M Business Services Personal Services Restaurants
$1m-$2M Manufacturing Personal Services Wholesale Distribution
$2M-$5M Manufacturing Business Services Construction/Engineering
How Long To Sell A Business in Q2 2016
<$500K 6
$500K-$1M 6
$1m-$2M 9
$2M-$5M 9
$5M-$50M 9
Source: IBBA
