Quarterly M&A Survey

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Alexandria, VA, May 24, 2016 – The quarterly Market Pulse Survey published by the International Business Brokers Association (IBBA),  M&A Source and the Pepperdine Private Capital Market Project found that retirement is the number one reason that sellers go to market, but the type of buyer varies with business size as does the approach for ensuring a successful transaction.

In the smallest deal category (businesses valued at under $500K) first-time buyers accounted for the largest buyer segment at 43%. More than half (51%) of buyers in the Main Street market are motivated by a desire to buy a job. That is, the buyer is looking to leave corporate America and be active full-time in the business. It is critical for these buyers to have a clear understanding of the business costs and the current owner’s lifestyle.On the other hand, buyers in the lower middle market are more often expanding an existing business through a horizontal or vertical add-on. In the largest deal category (businesses valued between $5 million to $50 million), private equity firms comprised the largest buyer group representing 43% of buyers. Larger businesses are typically purchased by educated and professional buyers who are interested in acquiring the company’s current labor force, property, and customer base.

Some key findings:

  • The average time to close has stayed relatively flat, averaging 6.5 months in the Main Street market and 9 months in the lower middle market. Of that timetable, roughly 60 to 90 days is spent in due diligence, after the seller accepts a letter of intent.
  • After retirement the leading reasons for selling a business include burnout and family issues.

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