(Philadelphia, Pennsylvania) September 8, 2018 – In a national survey of 277 M&A Advisors and Business Brokers, a majority declared this to be one of the best times to sell a business. According to the quarterly Market Pulse Report published by the International Business Brokers Association(IBBA), M&A Source, and the Pepperdine Private Capital Market Project. 76% of respondents indicated now was one of the best times to sell in the past 5 – 10 or more years. 21% of advisors declared this to be the best time they have ever seen. “The current environment means there may never be a better time to sell your business,” said Craig Everett, Ph.D., Director of the Pepperdine Private Capital Markets Project. “Capital is readily available from lenders, private equity firms, and family offices, and existing companies have record cash sitting on the sidelines. Interest rates are still relatively low, the economy is going strong with an estimated 4.3% GDP growth in Q2 2018, and business confidence remains high. Well-run companies are doing well in the M&A market right now.” Another driver for strategic buyers is that the strong economy is creating labor shortages which impact companies’ ability to grow organically. The result is more companies pursuing acquisitions to grow.
Other highlights of the Report:
- Strategic Buyers(Competitors, Industry Participants) account for a minority of buyers at all transaction value levels at 33% of all buyers.
- Time to Close from LOI date to Close Date – Percent that took at least 4 months:
- $1-$2 million transaction value – 25%
- $2-$5 million transaction value – 40%
- $5-$50 million – 57%
- The median for all deals $1-$50 million was 3.5 months.
- Time to Close from Engagement date to Close Date – Percent that took at least 12 months:
- $1-$2 million transaction value – 39%
- $2-$5 million transaction value – 50%
- $5-$50 million – 49%
- The median for all deals $1 – $50 million was 10 months.
- Earnouts are not popular with only 2% of deals reported containing earnouts.
- Median transaction value for deals between $1 and $5 million was 3.7x EBITDA. This is comparable to the results from one year ago in Q2 2017. Larger deals showed an increase from 5.4 to 5.9x however the small sample size could be affecting this calculation.
- No major change in deal values from Q2 2017 but the sentiment among advisors is there will be a marked increase in businesses coming onto the market. Last year only 21% of advisors projected an increase while now 52% now predict an increase in businesses coming onto the market. For now they see steady valuations as the reasons noted above will support valuations even if the supply of businesses for sale increases over the next year.
- Only 27% of sellers consulted with a business broker or M&A Advisor when planning for retirement. When an exit plan calls for selling the business these professionals may be in the best position to advise on market valuations, likely terms, employment or transition income, retained equity options and other deal options. Dave Clark, Managing Director of BMI Mergers & Acquisitions commented, “Some of our most successful clients and transactions were the result of annual conversations owners had with BMI advisors 2, 3 and sometimes 5 years before finally going to market.”
Obtain The Full Report here: IBBA_Q2_2018
About the Market Pulse Report
The quarterly IBBA and M&A Source Market Pulse Survey was created to gain an accurate understanding of the market conditions for businesses being sold with deal values up to $50 million. The national survey was conducted with the intent of providing a valuable resource to business owners and their advisors.
About International Business Brokers Association (IBBA) and the M&A Source Founded in 1991, The M&A Source promotes professional development of merger and acquisition professionals so that they may better serve their clients’ needs, and maximize public awareness of professional intermediary services available for middle market merger and acquisition transactions. For more information about the M&A Source visit www.masource.org. Founded in 1983, IBBA is the largest non-profit association specifically formed to meet the needs of people and firms engaged in various aspects of business brokerage and mergers and acquisitions. The IBBA is a trade association of business brokers providing education, conferences, professional designations, and networking opportunities. For more information about IBBA, visit the website at www.ibba.org