|
Presented by IBBA, M&A Source and in
Partnership with Pepperdine University
Who Has The Advantage: Buyers or Sellers? While sellers have a clear advantage in the lower middle market (LLM), advisor confidence is showing signs of decline. Year over year, advisors were less likely to report a seller's market sentiment for this sector.
Where Are Business Values Trending?
Main Street valuation multiples haven't seen much change over the last seven quarters. Four out of 5 sectors stayed the same or increased from a multiple standpoint. The lower middle market is the bright spot in this quarter's survey, recording a record 5.5 multiple of EBITDA, the best we've seen over the last seven quarters.
|
Market Pulse Quarterly Report Shows Retirement is the No. 1 Reason Sellers Go to Market. Strategies for Selling Large and Small Businesses Are Very Different:
The quarterly Market Pulse Survey published by the International Business Brokers Association (IBBA), M&A Source and the Pepperdine Private Capital Markets Project found that retirement is the number one reason sellers go to market, but the type of buyer varies with business size as does the approach for ensuring a successful transaction.
In the smallest deal category (businesses valued at under $500K) first-time buyers accounted for the largest buyer segment at 43%. More than half (51%) of buyers in the Main Street market are motivated by a desire to buy a job. That is, the buyer is looking to leave corporate America and be active full-time in the business. It is critical for these buyers to have a clear understanding of the business costs and the current owner's lifestyle.
On the other hand, buyers in the lower middle market are more often expanding an existing business through a horizontal or vertical add-on. In the largest deal category (businesses valued between $5 million to $50 million), private equity firms comprised the largest buyer group representing 43% of buyers. Larger businesses are typically purchased by educated and professional buyers who are interested in acquiring the company's current labor force, property, and customer base.
Read the full report on the M&A Source website
|
|
Ask The Experts
Question:
What Characteristics Can Cause A Business Acquisition From Qualifying For SBA Financing?
Answer:
Some of the scenarios that cause financial institutions to reject an acquisition loan include:
* Inadequate SDE (Seller's Discretionary Earnings)
* Business not priced right in relation to its SDE
* Buyer with insufficient cash for the down payment
and working capital needs of the business
* Buyer with inadequate experience in the industry
* Business with a high customer concentration risk factor
* Current year's interim financial statements indicate
decreasing operating results vs. historical financial statements
* Buyer unable to secure a lease term to match the loan term
|
Texas Economic News
