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The IBBA And M&A Source Market Pulse Survey Report Q1 2015
The sales of businesses continues to strengthen across all market sectors in the first quarter of 2015 based on the results of the 1st Quarter 2015 Market Pulse Survey published by the International Business Brokers Association (IBBA), M&A Source and the Pepperdine Private Capital Market Project. The reasons attributed to the increase in businesses sold are consumer and market confidence and low interest rates for buyers.
The International Business Brokers Association (IBBA), M&A Source and the Pepperdine Private Capital Market Project provide a quarterly report and evaluation of the market for businesses being sold in Main Street markets (values under $2 million) and lower middle markets (values $2 million to $50 million).
This is the only report for the sale of these types of businesses. The 1st Quarter 2015 survey was completed by 231 business brokers and M&A advisors, representing 39 states. CBB contributed to this survey.
More than half of the respondents (57 percent) had at least 10 years of experience in the M&A industry.
Participating advisors reported closing 143 Main Street market transactions and 20 lower middle market transactions in Q1 2015.
Some of the highlights of the report include:
- 59 percent of brokers characterized the Main Street businesses under $500,000 as a buyer's market, while larger companies - those valued at $1 million and above - were characterized as being in a seller's market.
- The majority of advisors are still pointing to a buyer's market in the Main Street sector, but the strength of that sentiment has weakened considerably over a year ago. A year ago, 77 percent of advisors indicated the smallest deals (under $500,000) faced a buyer's market, but today only 59 percent feel that way - a record low since the survey began.
- Valuations for Main Street deals stayed roughly the same or had slight increases. 65 percent of Q1 transactions under $499,999 included multiple Seller Discretionary Earnings or SDE of 1.75 to 3.0, while 76 percent of transactions between $500,000 to $999,000 had SDE multiples of 2.0 to 3.00.
- Expectations and optimism about the future continue to rise. All market sectors showed a growth in business owners wanting to sell with a mean of 3.2 or better (on a five-point scale) for all deals valued at $500,000 and above for Main Street transactions, a mean of 3.2 for the $2 million to $5 million sector, and a gain of 0.9 point jump in mean to 3.5 in the $5 million to $50 million.
- Retirement ranks as the number one reason to sell across both lower middle market sectors, ranking as 44 percent and 50 percent in the $2 million-$5 million sector and the $5 million-$50 million sector, respectively. Retirement also ranks as the number one reason to sell across all Main Street sectors.
- The average time to close for Main Street deals rose for every Main Street sector, jumping by as much as two months for businesses in the $500,000-$1 million sector. For lower middle markets, the time to close remained relatively flat, at 7 months in the $2 million-$5 million sector and 11.5 months in the $5 million to $50 million sector.
Buyers looking at buying a company in the Main Street market can still maintain an advantage when buying a smaller firm, but the market continues to shift toward a seller's market. For those buyers looking to make a purchase with a $1 million to $2 million deal, they are moving into a neutral market.
This is a national report. It does not include statistics for individual States.
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Texas Economic News
