By Brandon Mack
The International Business Brokers Association (IBBA) and M&A Source have recently published their third quarter market research for 2018. The report is a statistical analysis of 271 respondents who answered this quarter’s survey. This is the final 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 restaurants at 23%, personal services at 18%, business services at 17%, and consumer goods at 17%. 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 construction at 18%, restaurants at 16%, personal services at and 12%, business services at 12%. The median SDE multiple paid was 2.8x.
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 13%. The median SDE multiple paid was 3.3x.
In the $2M to $5M range, 45% of the businesses sold took nine months or longer from engagement to close. 26% of the business sold in this range were in the manufacturing industry. Construction made up 22% and Consumer goods made up 11%. The median SDE multiple paid was 3.0x, but in the $2M to $5M range 45% used an EBITDA multiple. The median EBITDA multiples was 4.0x.
In the over $5M range, the median number of months from engagement to close was 10 months. 33% of the business sold in this range were in the construction industry. Business services made up 27%. 67% of the companies in this range were sold based on a multiple of EBITDA, with a median of 5.4x.