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By Reizchel Oasay and Ron Buck
The International Business Brokers Association (IBBA) and M&A Source have recently published their second-quarter market research for 2022. The report is a statistical analysis of 355 respondents who answered this quarter’s 25-question survey. This is the second of a three-part series.
As for buyer types, in the under $500K valuation range, 41% of the buyers were first-time individuals, 38% were individuals who owned a business, and 19% were sold to existing companies. In the $500K to $1M range, 38% were sold to first-time individuals, 30% to individuals who owned a business, and 25% to existing businesses. In the $1M to $2M range, 37% were to first-time individuals, 31% to individuals who owned a business, and 31% were sold to existing companies. In the $2M to $5M range, 51% were sold to existing companies, and 29% to first-time individuals. Lastly, in the $5M to $50M range, 43% were sold to existing companies, 43% to private equity firms, and 10% to first-time individuals.
Sellers have multiple reasons for selling. For under $500K, 42% were for retirement, 20% were burnt out, 12% were relocation, and 11% looked for new or better opportunities. For the $500K to $1M range, 61% were for retirement, and 13% were burnt out. For the $1M to $2M range, 51% were for retirement, and 20% were burnt out. For the $2M to $5M range, 54% were for retirement, and 14% were burnt out. And for the $5M to $50M range, 48% were for retirement, 19% were unsolicited offers, 14% were burnt out, and 10% were other reasons.
Buyers have their own reasons for purchasing a business. Smaller business owners buying themselves a job made up: 41% for both the under $500K and the $500K to $1M ranges, 31% for the $1M to $2M range, 26% for the $2M to $5M range, and 10% for the $5M to $50M range. Horizontal and vertical add-ons made up: 39% for the under $500K range, 34% for the $500K to $1M range, 34% for the $1M to $2M range, 60% for the $2M to $5M range, and lastly, 76% for the $5M to $50M range. Lastly, better ROI than other investments made up: 10% for under $500K range, 16% for $500K to $1M range, 23% for the $1M to $2M range, 14% for the $2M to $5M range, and lastly, 10% for the $5M to $50M range.
Mostly, buyers are located within 20 miles of the businesses they purchase. Buyers are within 20 miles for the following ranges: 70% from businesses valued under $500K, 48% in the $500K to $1M range, 46% in the $1M to $2M range, 40% in the $2M to $5M range, and 33% in the $5M to $50M range. The percentage of buyers located more than 100 miles away increases significantly to 29% each for the $500K to $1M, $1M to $2M, and $2M to $5M ranges, and for 52% in the $5M to $50M range.
