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 40% of buyers, followed by existing business owners at 31%, and existing companies or strategic buyers at 23%.
- $1M – $2M: First-time individuals make up 38% of buyers, followed by existing business owners at 31%, and existing companies or strategic buyers at 28%.
- $2M – $5M: First-time individuals make up 33% of buyers, followed by existing business owners at 27%, and existing companies or strategic buyers at 21%.
- $5M – $50M: Strategic buyers (35%) and private equity firms (45%) in this segment, with individuals only making up 20%.
Motivations for Buying
Buyers’ motivations are diverse and often depend on their profile:
- Small Business Owners: Many seek to “buy themselves a job” (27% in the $500K-$1M range, 28% in the $1M-$2M range, 27% in the $2M-$5M range, and 10% in the $5M-$50M range).
- Existing Companies: Often looking for horizontal or vertical M&A add-ons to expand their operations (44% in the $500K-$1M range, 49% in the $1M-2M, 30% in the $2M-5M, and 60% in the $5M-$50M range).
- Investors: Seeking a better return on investment than other options (17% in the $500K-$1M range, 13% in the $1M-2M, 24% in the $2M-5M, and 10% 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 (60%), and burnt out (10%).
- $1M – $2M: Retirement (64%), and burnt out (13%).
- $2M – $5M: Retirement (61%).
- $5M – $50M: Retirement (55%), burnt out (15%), other factors (15%), and unsolicited offer (10%).
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.
