Business Brokerage/M&A Market Pulse 3Q18 – Part 1 of 3

Buying a business For Buyers For Sellers 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 2018. The report is a statistical analysis of 271 respondents who answered this quarter’s survey. This is the first of a three-part series where I will examine the IBBA’s and M&A Source’s analysis of the market.

The research found that 67% of sellers had not done any exit planning. Exit planning can be immensely helpful when selling your business. Check out Ron’s article “Want to Sell Your Company in 2018 – Do These 3 Things Now” for some tactical exit planning strategies to help prepare your business for sale.  In a future article we will discuss strategic/longer-term exit planning strategies.

Breaking down the whole sample, 45% of the deals recorded were valued under $500K, 24% of the deals were valued between $500K and $1M, 13% of the deals were valued between $2M, and $5M and 6% of the deals were valued between $5M and $50M.  65% of the respondents believed it was a buyers’ market for deals valued under $500K, on the other hand 66% of the respondents believed it was a sellers’ market for deals valued between $1M and $2M.

For businesses sold for under $500K, the median number of months from listing to close is seven months.  For businesses sold between $500K and $1M, the median number is eight months.  $1M to $2M and $2M to $5M takes nine months.  These numbers of months have been consistent for the past year.

Seller’s Discretionary Earnings (SDE) and Earnings before Interest, Tax, Depreciation and Amortization (EBITDA) median multiples has mostly stayed the same in comparison to last quarter; but, in the $500K to $1M range the SDE multiple has increased from 2.5 to 2.8 and in the $5M to $50M range the EBITDA multiple increased from 5.0 to 5.4. Most of the respondents use SDE including working capital multiple for business valued under $5M and use EBITDA not including working capital for businesses valued between $5M and $50M.