By: Reizchel Oasay and Ron Buck
The International Business Brokers Association (IBBA) and M&A Source have recently published their third-quarter market research for 2023. The report is a statistical analysis of 389 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, 43% were sold to first-time individuals, 36% to individuals who owned a business, and 17% to existing businesses. In the $1M to $2M range, 43% were sold to first-time individuals, 28% were sold to individuals who owned a business, and 25% to existing companies. In the $2M to $5M range, 24% were sold to first-time individuals, 46% to existing companies, 17% to individuals who owned a business, and 12% to private equity firms as a platform or add-on company. Lastly, in the $5M to $50M range, 44% were sold to existing companies, 44% to private equity firms as a platform or add-on company, and 11% to first-time individuals.
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: 64% of the $500K to $1M range, 45% of the $1M to $2M range, and 32% of the $2M to $5M range. The percentage of buyers located more than 100 miles away was 16% of the $500K to $1M range, 33% of the $1M to $2M range, 49% of the $2M to $5M range, and 83% 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: 38% of the $500K to $1M range, 30% of the $1M to $2M range, 22% of the $2M to $5M range, and 11% of the $1M to $2M range. Moreover, horizontal and vertical add-ons made up: 45% of the $500K to $1M range, 46% of the $1M to $2M range, 66% of the $2M to $5M range, and 67% of the $1M to $2M range. Lastly, better ROI than other investments made up: 16% of the $500K to $1M range, 15% of the $1M to $2M range, 10% of the $2M to $5M range, and 6% of the $1M to $2M range.
Reasons for Selling a Business:
Sellers have multiple reasons for selling. For the $500K to $1M range, 59% were for retirement, 12% were looking for new or better opportunities, and 10% were burnt out. For the $1M to $2M range, 65% were for retirement, 13% were looking for new or better opportunities, and 10% were burnt out. For the $2M to $5M range, 68% were for retirement, and 15% were burnt out. Lastly, for the $5M to $50M range, 39% were for retirement, 17% were unsolicited offers, 17% were for other reasons, 11% were burnt out, and 11% were looking for new or better opportunities.