Articles

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 2023. The report is a statistical analysis of 382 respondents who answered this quarter’s 25-question survey. This is the first of a three-part series.

Market Analysis – Buyer’s and Seller’s Market Evaluation:

The respondents were asked if they believed it was a buyer’s or seller’s market for different price ranges.  The following business ranges are believed to be a buyer’s market: 70% for businesses valued in the $500K to $1M range, and 53% for businesses valued in the $1M to $2M range. On the other hand, the following business ranges were believed to be a seller’s market: 56% for businesses valued in the $2M to $5M, and 62% for businesses valued in the $5M to $50M range.

Median Deal Closing Time by Price Range:

The median number of months from listing or engagement to close was 8 months for the $500K to $1M range, 9 months for the $1M to $2M range, and 10 months for the $2M to $5M range and $5M to $50M range.

Number of Offers Received: 

In the $500K to $1M range, 40% received 1 offer, 24% received 2 offers, and 36% received 3 offers or more. In the $1M to $2M range, 24% received 1 offer, 16% received 2 offers, and 60% received 3 offers or more. In the $2M to $5M range, 21% received 1 offer, 24% received 2 offers, and 56% received 3 offers or more. In the $5M to $50M range, 29% received 1 offer, 5% received 2 offers, and 66% received 3 offers or more.

Changes in SDE and EBITDA Multiples Across Price Ranges:

Seller’s Discretionary Earnings (SDE) and Earnings before Interest, Tax, Depreciation, and Amortization (EBITDA) median multiples had some movement from last quarter’s multiples. In the $500K to $1M range, SDE increased 2.5x to 2.8x and EBITDA stayed at 3.0x. In the $1M to $2M range, SDE stayed at 3.0x, and EBITDA stayed at 3.5x. In the $2M to $5M range, the SDE multiple stayed at 3.0x, and EBITDA stayed at 4.0x. Lastly, in the $5M to $50M range, the EBITDA decreased from 6.5x to 5.3x (no SDE-driven transactions were reported in this range for the quarter). Buyers and sellers should be careful when using generic multiples, as multiples are not only just one of several valuation methodologies, but also vary greatly by industry, so the mix and quality of businesses in the analysis can impact the quarter-to-quarter change.