IBBA, which stands for International Business Brokers Association (which I’m a proud member of) conducted their quarterly market pulse survey and here are the highlights. Deal activity continued strong in Q3, driven by the economic recovery, high levels of dry powder, and the favorable cost of debt. Multiples have returned to pre-pandemic levels in most market segments.
Employee Issues Send Sellers to Market
What’s top of mind for owners exiting their business these days? Employee issues – retaining people, hiring people, and managing wage inflation. According to advisors, buyers seeking an acquisition are primarily looking to expand their customer base, and yet labor issues are a significant concern for them too.
Seller-market sentiment is back to levels reported before the pandemic. Market confidence is further reflected in the final sale prices sellers received in Q3. In fact, sellers in the $5 million to $50 million sector realized, on average, a sale price that was 106% of benchmark. Overall, across all sectors, businesses received 96% (average) of benchmark in Q3 2021.
$5+ Million Deals Hit Record Multiple
The latest data from the Market Pulse survey reflects the growing premiums business owners get as the size of their company increases. Multiples typically increase as businesses get larger. And these businesses are more likely to draw buyer interest from the widest geographic radius.
Companies with enterprise value of $5 million or more saw a strong valuation jump this quarter, reaching a medium multiple of 6.8 from 5.9 a year ago
Exiting Without a Plan
Even though retirement is far and away the biggest reason sellers go to market, most business owners are doing little to no exit planning. The smaller the business, the less likely owners are to plan. Of those owners who did plan, most started less than a year before putting their business on the market. In the lower middle markets the percentage of owners who planned their exit plan was 67%.
Get in touch with us so that we can get started with your exit planning.