Recent Trends in the M&A Market

/in , , /by Jim Leonhard

Pepperdine University, of Malibu, California, in conjunction with the International Business Brokers Association and M&A Source, publishes a quarterly Market Pulse Survey of business brokers that provides useful information concerning the market for Main Street ($0-$2M sales price) and lower middle market ($2-$50M sales price) businesses.

Highlights from their most recent report for Q1 2016, include:

  • 50% of all business sell
  • Retirement is still the prime motivating factor for sellers followed by burnout.
  • The strongest growth for new sellers is in the $2M-$5M segment
  • Although the magnitude had declined somewhat, the lower middle market it is still a Sellers’ market.
  • Main Street multiples of SDE have remained relatively stable between 2 and 3x over the past 7 quarters
  • Multiples of EBITDA in the lower middle market have also remained fairly stable at 4x for $2M-$5M sales, but have risen for the $5M-$50 sales to 5.5x in the current quarter.
  • The average Main Street business sold for about 92% of asking price, while lower middle market companies sold for around 94% of the advisors’ and sellers’ expected price.
  • First-time buyers accounted for 43% of <$500K transactions while Private Equity Groups comprise 43% of buyers of $5M-50M businesses
  • It takes an average of 9 months to close a lower middle market deal.

To view the latest Market Pulse report or to discuss a current need in the area of business sales and acquisitions, please contact Jim Leonhard, CVA MBA at 916-800-2716 or jhleonhard@exitstrategiesgroup.com.