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Business Brokerage/M&A Market Pulse 3Q19 – Part 1 of 3

Buying a business For Buyers For Sellers Sell a Business Selling a business Valuation

Posted by Ron Buck on

By Brandon Mack

The International Business Brokers Association (IBBA) and M&A Source have recently published their third quarter market research for 2019. The report is a statistical analysis of 236 respondents who answered this quarter’s 25 question survey. This is the first of a three-part series.

One of the unique questions asked this quarter was: “What is the biggest concern or uncertainty that is affecting business valuations in the US?” The top response was “Talks of recession” at 53%, next was “Upcoming presidential election” at 19%, and the third was “Tariffs with China” at 11%.

The next unique question asked this quarter was: “What is the number one reason why businesses do not sell?” The top response was “Unrealistic value expectations by seller” at 61% and the second was “Downward trends of seller’s business” at 19%.

The survey also asked respondents if they believed it was a seller’s market or buyer’s market in each deal value range.  68% of the respondents believed it was a buyers’ market for deals valued under $500K but 71% of the respondents believed it was a sellers’ market for deals valued between $1M and $2M.

For businesses sold for under $500K, the median number of months from listing to close is six months. For businesses sold between $500K and $1M, the median number is eight months. $1M to $2M takes nine months and $2M to $5M takes eight months.

Seller’s Discretionary Earnings (SDE) and Earnings before Interest, Tax, Depreciation and Amortization (EBITDA) median multiples has stayed the same in comparison to last year except in the $2M to $5M range.  In the under $500K range, the SDE multiple was 2.0.  In the $500K to $1M range, the SDE multiple was 2.8.  In the $1M to $2M range, the SDE multiple was 3.3.  In the $2M to $5M range, the EBITDA multiple increased from 4.0 to 4.4.