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Part 2 – M&A Market Pulse 1Q24: Who’s Buying and Selling and Why?

Buying a business For Buyers For Sellers Selling a business Valuation

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By: Reizchel Oasay and Ron Buck

Understanding the motivations and demographics of buyers and sellers is crucial for navigating the M&A landscape. The latest data from the IBBA and M&A Source provides valuable insights into who’s active in the market and what’s driving their decisions.

Buyer Types Across Price Ranges

The types of buyers vary significantly depending on the price range:

  • $500K – $1M: Primarily first-time individual buyers (56%) and individuals who already own a business (24%).
  • $1M – $2M: Similar to the lower range, with 42% first-time buyers and 36% existing business owners.
  • $2M – $5M: Strategic buyers (existing companies) dominate at 46%, followed by first-time buyers (24%) and existing business owners (17%). Private equity firms also enter the picture at 12%.
  • $5M – $50M: Strategic buyers and private equity firms are the leading players, accounting for 35% and 39%, respectively.

Motivations for Buying

Buyers’ motivations are diverse and often depend on their profile:

  • Small Business Owners: Many seek to “buy themselves a job” (38% in the $500K-$1M range).
  • Existing Companies: Often looking for horizontal or vertical add-ons to expand their operations (35% in the $500K-$1M range, increasing to 70% in the $5M-$50M range).
  • Investors: Seeking a better return on investment than other options (24% in the $500K-$1M range).

Motivations for Selling

Retirement is the primary driver for sellers across all price ranges, but other factors come into play:

  • $500K – $1M: Retirement (41%), new opportunities (24%), and relocation (18%).
  • $1M – $2M: Retirement (66%) and new opportunities (11%).
  • $2M – $5M: Retirement (68%) and burnout (15%).
  • $5M – $50M: Retirement (65%) and burnout (17%).

Key Considerations for Buyers and Sellers

  • Buyers: Tailor your approach based on the typical buyer types and motivations in your target price range to help set yourself apart as an ideal candidate in the seller’s eyes.
  • Sellers: Understand the most important factors to potential buyers and position your business accordingly. If retirement is your goal, plan carefully for a smooth transition.

In Part 3, we’ll dive into the specifics of deal structures, valuation metrics, and industry trends shaping the M&A landscape in 2024.

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