By: Reizchel Oasay and Ron Buck
The International Business Brokers Association (IBBA) and M&A Source have recently published their second-quarter market research for 2023. The report is a statistical analysis of 413 respondents who answered this quarter’s 25-question survey. This is the first of a three-part series.
Market Analysis – Buyer’s and Seller’s Market Evaluation:
The respondents were asked if they believed it was a buyer’s or seller’s market for different price ranges. The following business ranges are believed to be a buyer’s market: 70% for businesses valued in the $500K to $1M range, and 55% for businesses valued in the $1M to $2M range. On the other hand, the following business ranges were believed to be a seller’s market: 57% for businesses valued in the $5M to $50M range. Businesses valued in the $2M to $5M range are believed to be the same at 50% buyer’s market and 50% seller’s market.
Median Deal Closing Time by Price Range:
The median number of months from listing or engagement to close was 8 months for the $500K to $1M range, 8.5 months for the $1M to $2M range, 8 months for the $2M to $5M range, and 11 months for the $5M to $50M range.
Number of Offers Received:
In the $500K to $1M range, 45% received 1 offer, 21% received 2 offers, and 34% received 3 offers or more. In the $1M to $2M range, 47% received 1 offer, 13% received 2 offers, and 39% received 3 offers or more. In the $2M to $5M range, 39% received 1 offer, 17% received 2 offers, and 42% received 3 offers or more. In the $5M to $50M range, 35% received 1 offer, 10% received 2 offers, and 55% received 3 offers or more.
Changes in SDE and EBITDA Multiples Across Price Ranges:
Seller’s Discretionary Earnings (SDE) and Earnings before Interest, Tax, Depreciation, and Amortization (EBITDA) median multiples had some movement from last quarter’s multiples. In the $500K to $1M range, SDE increased from 2.5x to 2.8x and EBITDA stayed at 3.0x. In the $1M to $2M range, SDE stayed 3.0x, but EBITDA decreased from 4.0x to 3.6x. In the $2M to $5M range, the SDE multiple increased from 3.3x to 3.5x, and EBITDA increased from 4.0x to 4.5x. And lastly, in the $5M to $50M range, the SDE multiple decreased from 4.5x to 4.0x, but EBITDA increased from 4.3x to 4.8x. Buyers and sellers should be careful when using generic multiples, as multiples are not only just one of several valuation methodologies but also vary greatly by industry, so the mix and quality of businesses in the analysis can impact the quarter-to-quarter change.