Business Brokerage/M&A Market Pulse 3Q17 – Part 2 of 2

Buying a business Selling a business Valuation

Posted by Ron Buck on

by Brandon Mack

The International Business Brokers Association (IBBA) and M&A Source have recently published their third quarter market research for 2017. The report is a statistical analysis of 334 respondents who answered this quarter’s survey. 35% of the respondents had at least 10 years of experience. This is the second of a two-part series where I will examine the IBBA’s and M&A Source’s analysis of the market.
Retirement was reported the number one reason across the board for sellers to go to market. In the ranges of under $500K and between $1M and $2M, searching for a new opportunity is the number two reason sellers go to market. In the ranges of $500K to $1M and $2M to $5M, the number two reason for going to market is becoming burnt out.
The buyers for businesses sold for less than $5M are mostly individuals. 48% of the buyers for businesses sold for less than $5M are first-time individuals and 33% are individuals who have owned a business before.  Businesses sold for between $5M and $50M are often sold to an existing company (51%) or individuals who have owned a business before (24%). There is a significant difference from Q2 to Q3 in acquisitions from existing companies. Add-ons have increased in Q3 by 4% in the less than $500K range, 11% in the $500K to $1M range, 16% in the $1M to $2M range, and 1% in the $2M to $5M range. As stated in part 1, the tight labor market has made it difficult for businesses to grow organically, so they are adding-on in order to grow.
The top industries for businesses sold under $1M are restaurants, personal services, consumer goods, and manufacturing. Leading industries for businesses sold between $1M and $5M are manufacturing, consumer goods, business services, and construction. Manufacturing companies are remarkably popular this year; they lead in almost every price range.