“This finding is consistent with predictions that more business owners will look to sell their companies in the coming year.” In every market segment, the majority of advisors predict deal value will grow in the next three months.
“Buyers in the lower middle market continue to gain confidence in the economy and in their ability to grow a business. They believe that buying a business is the best way to put money to work, versus starting an operation from the ground-up or other opportunities.”
In every segment, retirement was named the number one reason that sellers put their business on the market. For Main Street buyers, the number one motivating factor was to buy a job and control their own destiny.
Valuation multiples are markedly stronger in the lower middle market, correlating to a strong seller’s market sentiment and the presence of private equity firms in the buyer pool, as well as existing companies poised for growth through acquisition. The multiple for transactions between two million and five million is now 4.3 times EBITDA. EBITDA is Earnings Before Interest, Taxes, Depreciation, and Amortization. The multiple for transactions between five million and fifty million is 5.8 times EBITDA.
Ed Towers points out that personal services, restaurants, business services, and consumer goods/retail ranked among the most active industries. Health care and construction/engineering are also hot industries.
Tiger Brokerage Group is an M&A advisory firm located in Naples. They find buyers for owners of privately held businesses in the mid market.