Part 1 – M&A Market Pulse 1Q24: Insights for Buyers and Sellers

By: Reizchel Oasay and Ron Buck

The M&A market is dynamic, and the first quarter of 2024 has revealed some noteworthy trends. The International Business Brokers Association (IBBA) and M&A Source have released their latest market research, providing valuable insights for buyers and sellers.

Buyer’s or Seller’s Market? It Depends.

The market dynamics vary significantly depending on the price range of the business:

• $500K – $1M: This segment is currently considered a buyer’s market, with 62% of respondents indicating so.
• $1M – $100M+: Businesses in this range are generally experiencing a seller’s market, with percentages ranging from 51% for $1M-$2M businesses to 66% for those valued at $5M-$50M.

 Deal Timelines and Offers

The time it takes to close a deal can vary widely:

• $500K – $1M: Median closing time is 7 months.
• $1M – $2M: Median closing time is 9 months.
• $2M – $5M: Median closing time is 9.5 months.
• $5M – $50M: Median closing time is 13 months.

The number of offers received also fluctuates across price ranges, with businesses in the $500K-$2M range typically receiving 1-3 offers, while those in the $5M-$50M range often receive only one offer.

Valuation Multiples: SDE and EBITDA

Key valuation metrics include Seller’s Discretionary Earnings (SDE) and Earnings Before Interest, Taxes, Depreciation, and Amortization (EBITDA). Q1 2024 saw some notable shifts:

• $500K – $1M: SDE decreased from 2.8x to 2.5x, while EBITDA increased from 3.0x to 3.5x.
• $1M – $2M: SDE remained stable at 3.0x, but EBITDA rose from 3.5x to 4.3x.
• $2M – $5M: SDE and EBITDA increased, with SDE at 3.0x and EBITDA at 4.5x.
• $5M – $50M: SDE remained at 3.5x, while EBITDA slightly decreased from 5.3x to 5.1x.

These changes highlight the importance of using industry-specific multiples and considering multiple valuation methodologies, as the mix and quality of businesses in the analysis can impact the quarter-to-quarter change.

Key Considerations for Buyers and Sellers

• Buyers: Be aware of the competitive landscape in your target price range and factor in a detailed analysis of valuation multiples for the specific industry you are looking at when making offers.
• Sellers: Price your business competitively, and be prepared for varying deal timelines and offer volumes depending on your business’s value.

In Part 2, we’ll explore the motivations and demographics of buyers and sellers in the current M&A market.