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Market Pulse Report 2Q 2021 – Part 1 of 3

Posted by Ron Buck on

By Reizchel Joy Oasay and Ron Buck

The International Business Brokers Association (IBBA) and M&A Source have recently published their second-quarter market research for 2021. The report is a statistical analysis of 315 respondents who answered this quarter’s 25 question survey. Currently, the business environment considers employees and its financial resources as the factors important to buyers in response to the current deals.

The respondents were asked if they believed it was a buyer’s or seller’s market for all the different price ranges. For businesses valued under $500K, 57% of the respondents answered it was a buyer’s market. Additionally, 47%, or about even, responded that it was a buyer’s market for business valued between $500K and $1M.  Over $1 million it switched to a seller’s market, with 27% answered it was a buyer’s market for the $1M to $2M range, 24% answered it was a buyer’s market for the $2M to $5M range, and only 19% said it was a buyer’s market for the $5M to $50M range.

The median number of months from listing or engagement to close was 8 months under $500K to $5M, and 9 months from $5M to $50M. The median number of months from LOI or offer to close was 2 months under $500K, 3 months from $500K to $5M, and 4 months from $5M to $50M.

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 median SDE and EBITDA, SDE stayed at 2x for the under $500K transactions, and EBITDA declined slightly from 3.5x to 3.3x. In the $500K to $1M range, SDE decreased from 2.75x to 2.5x, and EBITDA declined from 4.25x to 4.0x. In the $1M to $2M range, SDE multiple increased from 3.0x to 3.3x, but EBITDA declined from 4.4x to 4.0x. In the $2M to $5M range, the SDE multiple increased from 3.0x to 4.0x, and EBITDA from 4.0x to 4.5x. And lastly, in the $5M to $50M range, the SDE multiple increased from 3.75x to 4.25x, and EBITDA from 5.0x to 5.8x. These quarterly movements were a little higher than we see most quarters, likely due to some continued disruption from COVID, and unusual 2020 financial results that are not reflective of the company’s ongoing prospects. 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.