By Brandon Mack
The International Business Brokers Association (IBBA) and M&A Source have recently published their fourth quarter market research for 2019. The report is a statistical analysis of 300 respondents who answered this quarter’s 25 question survey. This is the first of a three-part series.
The survey asked respondents if they believed it was a seller’s market or buyer’s market in each deal value range. 69% (increasing by 8% from 61% in Q4 of 2018) of the respondents believed it was a buyers’ market for deals valued under $500K but 70% of the respondents believed it was a sellers’ market for deals valued between $1M and $2M, increasing to 75% for the $2M to $5M range, and 82% responding that it was a seller’s market in the $5M to $50M range.
For businesses sold for under $500K and in the $500K and $1M range, the median number of months from listing to close is seven months. For businesses sold between $1M and $5M, the median was nine months. In the $5M to $50M range, it was 11 months.
Seller’s Discretionary Earnings (SDE) and Earnings before Interest, Tax, Depreciation and Amortization (EBITDA) median multiples have 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 median SDE multiple was also 3.3 compared with 3.6 a year ago. For transactions less than $2M, multiples of SDE are used at least 85% of the time. In the $2M to $5M range, SDE multiples were used 57% of the time, with EBITDA multiples making up the remainder. The EBITDA multiple in this range was 4.3 both this past quarter and a year ago. Above $5M, SDE was only used 15% of the time, with EBITDA used 85% of the time. The EBITDA multiple for the above $5M transactions was 5.8.
