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 2022. The report is a statistical analysis of 493 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, 43% were individuals who owned a business, 39% were first-time buyer/individual, and 18% were sold to existing companies. In the $500K to $1M range, 43% were sold to first-time individuals, 27% to individuals who owned a business, and 27% to existing businesses. In the $1M to $2M range, 41% were sold to individuals who owned a business, 27% were to first-time individuals, and 23% were to existing companies. In the $2M to $5M range, 33% to individuals who owned a business, 26% were sold to existing companies, 21% to first-time individuals, and 21% to private equity firms. Lastly, in the $5M to $50M range, 47% to private equity firms, 31% were sold to existing companies, and 11% were individuals who owned a business.
Sellers have multiple reasons for selling. For under $500K, 49% were for retirement, and 17% were burnt out. For the $500K to $1M range, 53% were for retirement, 19% were burnt out, and 11% were family issues. For the $1M to $2M range, 64% were for retirement, and 14% were burnt out. For the $2M to $5M range, 58% were for retirement, and 19% were burnt out. And for the $5M to $50M range, 56% were for retirement, 11% were burnt out, and 11% were family issues.
Buyers have their own reasons for purchasing a business. Smaller business owners buying themselves a job made up: 37% of the under $500K range, 42% of the $500K to $1M range, 26% of the $1M to $2M range, and 23% of the $2M to $5M range. Moreover, the horizontal and vertical add-ons made up: 44% of the under $500K range, 46% of the $500K to $1M range, 40% of the $1M to $2M range, 51% of the $2M to $5M range, and lastly, 67% for the $5M to $50M range. Lastly, better ROI than other investments made up: 8% of the under $500K range, 5% of the $500K to $1M range, 16% of the $1M to $2M range, 19% of the $2M to $5M range, and lastly, 19% of 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: 69% of businesses valued under $500K, 59% of the $500K to $1M range, 42% of the $1M to $2M range, 40% of the $2M to $5M range, and 11% of the $5M to $50M range. The percentage of buyers located more than 100 miles away decreases significantly to 11% of businesses valued under $500K, 27% of the $500K to $1M range, 36% of the $1M to $2M range, 35% of the $2M to $5M range, and 78% of the $5M to $50M range.