By: Reizchel Oasay and Ron Buck
To navigate the M&A landscape, it’s crucial to understand the reasons for selling a business, the types of business buyers, the motivations of M&A buyers, and the demographics of both buyers and sellers. The latest data from the IBBA and M&A Source provides valuable insights into who is active in the market and what drives their decisions.
Buyer Types Across Price Ranges
Buyer types vary significantly depending on the price range:
- $500K – $1M: First-time individuals make up 41% of buyers, followed by existing business owners at 35%, and existing companies or strategic buyers at 24%.
- $1M – $2M: First-time individuals make up 49% of buyers, followed by existing business owners at 26%, and existing companies or strategic buyers at 15%.
- $2M – $5M: First-time individuals make up 34% of buyers, followed by existing business owners at 29%, and existing companies or strategic buyers at 24%
- $5M – $50M: Strategic buyers (29%) and private equity firms (40%) in this segment, with individuals only making up 17%.
Motivations for Buying
Buyers’ motivations are diverse and often depend on their profile:
- Small Business Owners: Many seek to “buy themselves a job” (30% in the $500K-$1M range, 38% in the $1M-$2M range, 24% in the $2M-$5M range, and 8% in the $5M-$50M range).
- Existing Companies: Often looking for horizontal or vertical M&A add-ons to expand their operations (42% in the $500K-$1M range, 37% in the $1M-2M, 38% in the $2M-5M, and 63% in the $5M-$50M range).
- Investors: Seeking a better return on investment than other options (20% in the $500K-$1M range, 13% in the $1M-2M, 27% in the $2M-5M, and 21% in the $5M-$50M range).
Motivations for Selling
Retirement is the primary driver for sellers across all price ranges, but other factors come into play:
- $500K – $1M: Retirement (41%), burnt out (15%), new or better opportunity (13%), and health (11%).
- $1M – $2M: Retirement (51%), burnt out (21%), and new or better opportunity (15%).
- $2M – $5M: Retirement (71%), and unsolicited offer (10%).
- $5M – $50M: Retirement (63%), and new or better opportunity (13%).
Key Takeaways for Buyers and Sellers
- Buyers: Tailor your approach based on the typical buyer types and motivations in your target price range. This can help you stand out to sellers.
- Sellers: Understand the most important factors for potential buyers. Then position your business accordingly. If retirement is your goal, plan carefully for a smooth transition.
In Part 3, we’ll delve into the specifics of deal structures, valuation metrics, and industry trends that are shaping the M&A landscape in 2025.
