By Reizchel Oasay and Ron Buck
The International Business Brokers Association (IBBA) and M&A Source have recently published their fourth-quarter market research for 2021. The report is a statistical analysis of 416 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 in valuation range, 43% of the buyers were first-time individuals, 35% were individuals who owned a business, and 20% were sold to existing companies. In the $500K to $1M range, 47% were sold to first-time individuals, 29% to individuals who owned a business, and 23% to existing businesses. In the $1M to $2M range, 40% were sold to existing companies, 30% were to individuals who owned a business, and 22% were first-time individuals. In the $2M to $5M range, 40% were sold to existing companies, 26% were sold to individuals who owned a business, and 15% were sold to first-time individuals. Lastly, in the $5M to $50M range, 50% were sold to existing companies, 20% were sold to add-on private equity firms, 15% were sold to private equity firms, and 10% were sold to first-time individuals.
Sellers have multiple reasons for selling. For under $500K, 48% was for retirement, 12% for recapitalization, 9% for health reasons, and 9% for relocation. For the $500K to $1M range, 60% was for retirement and 11% for recapitalization. For the $1M to $2M range, 60% was for retirement, 12% for health reasons, and 8% for recapitalization. For the $2M to $5M range, 49% was for retirement and 13% for recapitalization, and 13% for “other”. And for the $5M to $50M range, 53% was for retirement, 15% for “other”, and 10% are burnt out.
Buyers have their own reasons for purchasing a business. Smaller business owners buying themselves a job made up: 41% for under $500K and 36% of the $500K to $1M range. Add-ons combined both horizontal and vertical made up: 38% for under $500K range, 40% for $500K to $1M range, 57% for $1M to $2M range, 58% for $2M to $5M range, and lastly, 78% for $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: 67% from businesses valued under $500K, 50% in the $500K to $1M range, 42% in the $1M to $2M range, and 43% in the $2M to $5M range. The percentage of buyers located more than 100 miles away increases significantly to 43% in the $2M to $5M range, and 75% in the $5M to $50M.
