Year-End 2017: State of the Small and Lower Middle M&A Market

According to a recent BizBuySell report a record number of small businesses changed hands in 2017. Indeed, there was a 27% increase in the number of business that were sold. Earnings multiples continued to increase and are approaching 2.5x earnings. There was an increase in days on the market with the average business selling in slightly more than 160 days (roughly 5.5 months). In the Richmond, VA region, BizBuySell reported that average earnings multiples were 2.9x in Q4 2017. Meanwhile, average multiples were fractionally lower (2.8x) for the same time frame in Northern Virginia. 

The quarterly Pratt report, which shows industry sales across all price ranges, also points to the strength of the current market. Larger businesses with seller discretionary earnings (SDE) of $1 million to $5 million are selling at a median multiple of 3.1, while businesses with SDE in excess of $5 million, are selling for close to 3.6 times earnings. 

Light & Raphael Business Brokers has witnessed continued activity on the part of both buyers and sellers as interest rates remain low, with many baby boomers looking to exit and plenty of younger entrepreneurs looking to fill the void. 

As always, we would be more than happy to speak with you or your clients about potential business acquisitions or divestitures.

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