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Business Brokerage/M&A Market Pulse 2Q18 – Part 3 of 3

Buying a business For Buyers For Sellers Selling a business Valuation

Posted by Ron Buck on

By Brandon Mack

The International Business Brokers Association (IBBA) and M&A Source has recently published their second quarter market research for 2018. The report is a statistical analysis of 277 respondents who answered a 25-question survey. This is the third and final part of a three-part series where I will examine the IBBA’s and M&A Source’s analysis of the market, including the median number of months to sell, most common industries, and median Seller’s Discretionary Earnings (SDE) multiple for under $500k, $500k to $1 million, $1 to $2 million, $2 to $5 million size ranges, and over $5 million.  

For businesses sold for under $500K, the median number of months between the engagement and close was seven months. The most common industries in this range were personal services at 29%, restaurants at 19%, business services at 13%, and consumer goods at 13%. The median SDE multiple paid in this range was 2.0x.

In the $500K to $1M range, the median number of months between the engagement and close was eight months. The largest industries in this range were businesses services at 29%, construction at 15%, and personal services at 12%. The median SDE multiple paid was 2.5x.

The median number of months in the $1M to $2M range from engagement to close was nine months. The most deals per industry in the $1M to $2M range are as follows: business services at 23%, manufacturing at 13%, consumer goods at 13%, and personal services at 32%. 26% of the businesses sold this quarter in this range were sold at an SDE multiple of 3.25x, with the median 3.3x.

In the $2M to $5M range, 40% of the businesses sold took twelve months or longer from engagement to close, with a median of 9.5 months.  23% of the business sold in this range were in the manufacturing industry. Business services made up 17%, and construction made up 10%. 32% of the businesses sold in this range were sold at an SDE multiple of 3.25x, with the median 3.3x.

In the over $5M range, 57% of the businesses sold took twelve months or longer from engagement to close, with a median of 12.5 months.  50% of the business sold in this range were in the manufacturing industry. Construction made up 19%. Most of the companies in this range were sold based on a multiple of EBITDA, with a median of 5.9x.