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 second of a three-part series.
Buyer Types Across Price Ranges:
As for buyer types, in the $500K to $1M range, 40% were sold to first-time individuals, 37% to individuals who owned a business, and 21% to existing companies or strategic buyers. In the $1M to $2M range, 51% were sold to individuals who owned a business, and 35% to first-time individuals. In the $2M to $5M range, 37% were sold to existing companies or strategic buyers, 27% to individuals who owned a business, and 22% to first-time individuals. Lastly, in the $5M to $50M range, 69% were sold to private equity firms as a platform or add-on company, and 30% to existing companies.
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: 51% of the $500K to $1M range, 51% of the $1M to $2M range, and 44% of the $2M to $5M range. The percentage of buyers located more than 100 miles away was 25% of the $500K to $1M range, 20% of the $1M to $2M range, 41% of the $2M to $5M range, and 78% 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: 46% of the $500K to $1M range, 47% of the $1M to $2M range, and 20% of the $2M to $5M range. Moreover, horizontal and vertical add-ons made up: 43% of the $500K to $1M range, 38% of the $1M to $2M range, 49% of the $2M to $5M range, and 87% of the $5M to $50M range. Lastly, better ROI than other investments made up: 7% of the $500K to $1M range, 7% of the $1M to $2M range, 22% of the $2M to $5M range, and 13% of the $5M to $50M range.
Reasons for Selling a Business:
Sellers have multiple reasons for selling. For the $500K to $1M range, 59% were for retirement, 15% were looking for new or better opportunities, and 10% were burnt out. For the $1M to $2M range, 53% were for retirement, 16% were relocating, and 11% were burnt out. For the $2M to $5M range, 68% were for retirement, and 10% were for other reasons. Lastly, for the $5M to $50M range, 48% were for retirement, 13% were burnt out, 13% were unsolicited offers, and 13% were for other reasons.
