Articles

By Ethan Parker and Ron Buck

The International Business Brokers Association (IBBA) and M&A Source have recently published their first-quarter market research for 2023.  The report is a statistical analysis of 371 respondents who answered this quarter’s 25-question survey.  This is the second of a three-part series.

Buyer Types Across Price Ranges:

As for buyer types, in the $500K to $1M range, 47% were sold to first-time individuals, 24% to individuals who owned a business, and 22% to existing businesses. In the $1M to $2M range, 25% were to first-time individuals, 30% were sold to individuals who owned a business, and 41% were to existing companies. In the $2M to $5M range, 18% to first-time individuals, 27% to individuals who owned a business, 37% were sold to existing companies, and 14% to private equity firms. Lastly, in the $5M to $50M range, 10% were sold to individuals who owned a business, 57% were sold to existing companies, and 19% to private equity firms.

Proximity of Buyers to Purchased Businesses:

Mostly, buyers are located within 20 miles of the businesses they purchase. Buyers are within 20 miles for the following ranges: 50% of the $500K to $1M range, 41% of the $1M to $2M range, 22% of the $2M to $5M range, and 33% of the $5M to $50M range. The percentage of buyers located more than 100 miles away decreases significantly to 33% of the $500K to $1M range, 25% of the $1M to $2M range, 49% of the $2M to $5M range, and 43% of the $5M to $50M range.

Motivations for Buying a Business:

Buyers have their own reasons for purchasing a business. Smaller business owners buying themselves a job made up: 34% of the $500K to $1M range, 25% of the $1M to $2M range, and 16% of the $2M to $5M range. Moreover, the horizontal and vertical add-ons made up: 42% of the $500K to $1M range, 50% of the $1M to $2M range, 61% of the $2M to $5M range, and lastly, 72% for the $5M to $50M range.  Lastly, better ROI than other investments made up: 14% of the $500K to $1M range, 16% of the $1M to $2M range, and lastly, 16% of the $2M to $5M range.

 Reasons for Selling a Business:

Sellers have multiple reasons for selling. For the $500K to $1M range, 53% were for retirement, 19% were burnt out, and 3% were family issues. For the $1M to $2M range, 57% were for retirement, and 18% were burnt out. For the $2M to $5M range, 55% were for retirement, and 12% were family issues. And for the $5M to $50M range, 52% were for retirement, 5% were burnt out, and 5% were family issues.