By Brandon Mack<\/p>\n
The International Business Brokers Association (IBBA) and M&A Source have recently published their third-quarter market research for 2020. The report is a statistical analysis of 352 respondents who answered this quarter\u2019s 25 question survey. This is the second of a three-part series.<\/p>\n
This quarter, first-time individual buyers were the largest category of buyers for companies across the tiers, up through companies valued up to $2M.<\/strong> In the under $500K <\/strong>in valuation range, 47% of the buyers were first-time individuals, 30% were individuals who have owned a business, and 22% were sold to existing companies. In the $500K to $1M range<\/strong>, 41% were sold to first-time individuals, 39% were sold to individuals who have owned a business, and 20% were sold to existing businesses. In the $1M to $2M range<\/strong>, 40% were sold to first-time individuals, 37% were sold to individuals who have owned a business, and 17% were sold to existing businesses. In the $2M to $5M range<\/strong>, 28% were sold to first time owners, 30% to owners who have owned a business, and 30% were sold to existing companies. Lastly, in the $5M to $50M range, 15% were sold to first-time individuals, 25% were sold to individuals who have owned a business, 35% were sold to existing businesses, and 20% were sold to PE firms.<\/p>\n In the main street and lower middle market, the number one reason businesses are sold is due to the owner retiring<\/strong>. For businesses under $500K<\/strong>, retirement makes up 38% of the reasons for the seller to go to market. For businesses between $500K and $1M<\/strong>, retirement makes up 67%. From $1M to $2M<\/strong>, retirement makes up 69%, from $2M to $5M<\/strong> retirement makes up 65%, and from the $5M to $50M<\/strong> range, retirement makes up 60%. Many sellers this quarter are going to market because they found a new opportunity; this makes up 17% of sellers under $500K, 10% of sellers between $500K and $1M, 4% of sellers between $1M and $2M, 9% of sellers between $2M and $5M, and 15% of sellers between $5M and $50M.<\/p>\n Often, the buyers are located within 20 miles of the businesses being sold.<\/strong> For businesses valued under $500K<\/strong>, 72% of the sellers are within 20 miles. In the $500K to $1M range<\/strong>, 61% of the buyers are within 20 miles. In the $1M to $2M range<\/strong>, 52% of the buyers are within 20 miles. In the $2M to $5M range<\/strong>, 44% of the buyers are within 20 miles. Lastly, in the $5M to $50M range<\/strong>, 50% of buyers are located more than 100 miles away, likely representing strategic buyers or PE firms.<\/p>\n