By Reizchel Oasay and Ron Buck
The International Business Brokers Association (IBBA) and M&A Source have recently published their first-quarter market research for 2022. The report is a statistical analysis of 360 respondents who answered this quarter’s 25-question survey. This is the second of a three-part series.
As for buyer types, in the under $500K in valuation range, 40% of the buyers were first-time individuals, 44% were individuals who owned a business, and 15% were sold existing companies. In the $500K to $1M range, 41% were sold to first-time individuals, 32% to individuals who owned a business, and 24% to existing businesses. In the $1M to $2M range, 40% were sold to existing companies, 20% to individuals who owned a business, and 34% to first-time individuals. In the $2M to $5M range, 44% were sold to existing companies, 19% to individuals who owned a business, and 19% to first-time individuals. Lastly, in the $5M to $50M range, 45% were sold to existing companies, 30% to private equity firms and add-ons, and 15% to first-time individuals.
Sellers have multiple reasons for selling. For under $500K, 28% were for retirement, 21% were burnt out, and 14% looked for new or better opportunities. For the $500K to $1M range, 49% were for retirement, 20% were burnt out, and 18% looked for new or better opportunities. For the $1M to $2M range, 72% were for retirement and 12% were burnt out. For the $2M to $5M range, 50% were for retirement, 13% were for health issues, and 13% were for relocation. And for the $5M to $50M range, 65% were for retirement, and 10% were for family issues.
Buyers have their own reasons for purchasing a business. Smaller business owners buying themselves a job made up: 35% for both the under $500K and the $500K to $1M range. Horizontal and vertical add-ons made up: 46% for under $500K range, 36% for $500K to $1M range, 58% for $1M to $2M range, 66% for $2M to $5M range, and lastly, 65% for $5M to $50M range.
Mostly, buyers are located within 20 miles of the businesses they purchase. Buyers are within 20 miles for the following ranges: 73% from businesses valued under $500K, 54% in the $500K to $1M range, and 52% in the $1M to $2M range. The percentage of buyers located more than 100 miles away increases significantly to 47% in the $2M to $5M range and 60% in the $5M to $50M.