International Business Brokers Association conducted 2022 Q1 Marketpulse survey where 360 M&A Advisors participated, including myself. Here are the results
Advisors reported that 45% of their engagements terminated without closing in Q1 2022. For the second quarter in a row, this marks one of the lowest termination rates in survey history. Engagements terminate for a variety of reasons, including unrealistic seller expectations, distressed business performance, or other factors that make the business unsalable.
Meanwhile, advisors are also reporting a strong uptick in the number of new clients coming to market in Q1 2022. More than 60% of lower middle market advisors said their number of clients “greatly increased”
Businesses with enterprise value of $5 million to $50 million earned an average multiple of 6.0x EBITDA and realized an average final sale price at 107% of benchmark.
A seller’s market occurs when demand exceeds supply. There are more interested, active buyers than there are quality deals on the market. In a seller’s market, buyer’s compete in order to win deals. This typically translates to increased values and more favorable deal terms for the seller.
Q1 trends shows an ongoing rebound in confidence since the start of the pandemic. In fact, this quarter shows the highest lower middle market confidence we’ve seen since the start of the Market Pulse survey in 2014.
Time to Close
The average time to sell a small business shrunk slightly, varying from six to 11 months. Of that time roughly 60 to 120 days are spend in due diligence and execution, after a signed letter of intent or offer.
Financing Deals in 2022
On Average buyer’s paid 82% cash at close for businesses bought in Q1, with rest in seller note and around 1-2% in an earn out