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By Brandon Mack
The International Business Brokers Association (IBBA) and M&A Source have recently published their fourth-quarter market research for 2020. The report is a statistical analysis of 363 respondents who answered this quarter’s 25 question survey. This is the first of a three-part series.
When asked about the pandemic’s effect on valuations, 74% of respondents answered that the pandemic will have a negative effect on business values. 8% of respondents believe that it will take until 1Q2021 for M&A activity to return to pre-March levels (down 6% from last quarter); 22% believe it will take until 2Q2021 (down 7% from last quarter) and 22% believe it will take until 3Q2021 (up 5% from last quarter). However, here in the Carolinas, we are seeing a resurgence in buyer interest for solid companies.
For businesses sold for under $500K, the median number of months from listing to close was seven months. For businesses sold between $500K and $1M, the median was also seven months. From $1M to $2M the median from listing to close was eight and a half months, and from $2M to $5M the median was ten months. In the $5M to $50M range, it was eleven months.
Seller’s Discretionary Earnings (SDE) and Earnings before Interest, Tax, Depreciation and Amortization (EBITDA) median multiples are not far off from last year’s multiples. In the under $500K range, the SDE median multiple paid stayed at 2x. In the $500K to $1M range, the SDE multiple stayed at 2.8x. In the $1M to $2M range, the SDE multiple decreased to 3.0x. The EBITDA multiple paid in the $2M to $5M range stayed the same at 4.3x. In the $5M to $50M range, the EBITDA multiple decreased to 5.0x from 5.8x.
