A new M&A report was issued last week from the International Business Broker Association (IBBA), Pepperdine Private Capital Market Project and M&A Source highlighting the latest US activity. Thanks to Rose Stabler for the heads up. The report interviews all relevant M&A brokers intensively to uncover the activity of deals in the $500k to $50m space.
Main conclusions worth understanding:
- Valuations are staying strong.
- Sellers are gaining greater leverage.
- Boomer retirement driving sellers to market.
- Traditional lenders back in the game, supporting smaller PE players and individuals to fund deals.
- In the $2m to $5m segment, most buyers were individuals at 47% of the total.
- In the $5m to $50m segment, about 60% by buyer volume were PE players.
- In the sub $2m segment, biggest reason cited for the deal – “buying a job”.
- In the $2m to $5m segment the main driver behind the deal was horizontal add on e.g. buying related businesses.
- Vendor aspiration on price and lack of patience were cited as the main reasons for deal failure.
- In the $5m to $50m segment there was a huge increase year on year in mezzanine financing. Q4, 2012 mezz made up 3% of financing jumping to 26% in Q4, 2013.
- Deal timetables shrunk dramatically in the $5m to $50m comparing Q4 2012 with Q4 2013, going from a median 12 months to five!
- Exit values in terms of EBITDA multiples seemed way too low to me.
I suppose it depends whether you are buying or selling but expect to pay significantly higher than these multiples to acquire a remarkable business. Note: The sample size was 238 respondents (M&A brokers/advisers) from 38 states.
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