Articles

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. This is the second of a three-part series.

As for buyer types, in the under $500K in valuation range, 50% of the buyers were first-time individuals, 28% were individuals who owned a business, and 22% were sold to existing companies. In the $500K to $1M range, 39% were sold to first-time individuals, 28% to individuals who owned a business, and 33% to existing businesses. In the $1M to $2M range, 34% were sold to first-time individuals, 31% to individuals who owned a business, 31% to existing businesses, and 3% to private equity firms. In the $2M to $5M range, 12% were sold to first-time individuals, 24% to individuals who owned a business, 44% to existing businesses, and 20% to private equity firms. Lastly, in the $5M to $50M range, 21% were sold to first-time individuals, 7% to individuals who owned a business, 43% to existing businesses, and 28% to private equity firms.

Sellers have multiple reasons for selling, including owner retiring, health issues, burnt out, wanting to pursue a new opportunity, and receiving an unsolicited offer.  Unfortunately, this quarter’s data are not available identifying specific seller reasons.

Buyers have their own reasons for purchasing a business. Smaller business owners buying themselves a job make up 43% of the under $500K, 35% of the $500K to $1M range, and 37% of the $1M to $2M range.  Add-ons, both horizontal and vertical, make up 36% under $500K, 39% in the $500K to $1M range, 43% in the $1M to $2M range, 64% in the $2M to $5M range, and lastly, 57% in the $5M to $50M.

Mostly, buyers are located within 20 miles of the businesses they purchase. For businesses valued under $500K, 61% of the buyers are within 20 miles. In the $500K to $1M range, it’s 56% of the buyers. In the $1M to $2M range, it’s 40% of the buyers. Often, starting in the $1M to $2M range, the percentage of buyers located more than 100 miles away increases significantly. In the $1M to $2M range, it’s 29% of the buyers.  In the $2M to $5M range, it’s 48% of the buyers, and lastly, in the $5M to $50M range, it’s 79% of the buyers.