Articles

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 2023.  The report is a statistical analysis of 413 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, 45% were sold to first-time individuals, 30% to individuals who owned a business, and 24% to existing businesses. In the $1M to $2M range, 33% were sold to individuals who owned a business, 31% to existing companies, and 29% to first-time individuals. In the $2M to $5M range, 33% were sold to existing companies, 30% to individuals who owned a business, 23% to first-time individuals, and 14% to private equity firms as a platform or add-on company. Lastly, in the $5M to $50M range, 39% were sold to existing companies, and 39% to private equity firms as a platform or add-on company.

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: 59% of the $500K to $1M range, 50% of the $1M to $2M range, 30% of the $2M to $5M range, and 22% of the $5M to $50M range. The percentage of buyers located more than 100 miles away was 18% of the $500K to $1M range, 23% of the $1M to $2M range, 49% of the $2M to $5M range, and 70% of the $5M to $50M range.

Motivations for Buying a Business:

Buyers have their own reasons for purchasing a business. Small business owners buying themselves a job made up: 40% of the $500K to $1M range,33% of the $1M to $2M range, 19% of the $2M to $5M range, and 4% of the $1M to $2M range. Moreover, horizontal and vertical add-ons made up: 42% of the $500K to $1M range, 42% of the $1M to $2M range, 52% of the $2M to $5M range, and 78% of the $1M to $2M range. Lastly, better ROI than other investments made up: 13% of the $500K to $1M range, 23% of the $1M to $2M range, 21% of the $2M to $5M range, and 13% of the $1M to $2M range.

 Reasons for Selling a Business:

Sellers have multiple reasons for selling. For the $500K to $1M range, 63% were for retirement, 11% were burnt out, and 11% were looking for a new/better opportunity. For the $1M to $2M range, 54% were for retirement, 15% were burnt out, and 15% were looking for a new/better opportunity.  For the $2M to $5M range, 58% were for retirement, and 14% were burnt out. Lastly, for the $5M to $50M range, 57% were for retirement, 13% were burnt out, and 13% were recapitalization.