The Market Pulse is a quarterly survey conducted by M&A Source and the IBBA (International Business Brokers Association) detailing the level of M&A activity among Main Street and Lower Middle market businesses, which is derived from input from over 400 M&A professionals. As such, it is considered one of the most accurate of its kind and a good indicator of actual M&A activity. View or download the full report here. All chart images and information below are credited to the Market Pulse Q2 2020 Report.
Report Charts & Highlights
Shaken Markets Result in Delayed Deals
Main Street and lower middle market businesses both saw deals delayed in the second quarter this year. Main Street businesses, those valued at under $2 million dollars, had 36% of deals delayed, while 37% of deals were delayed in the lower middle market (business valued between $2 million and $50 million). The leading source of these delays in both markets was attributed to buyers. Advisors surveyed predict that the market won’t rebound to pre-pandemic levels until Q1 or Q2 2021.
Covid-19 Impact on Businesses for Sale
While 75% of businesses in Q1 of this year were either temporarily closed or working at partial capacity, progress was made during the second quarter with nearly half of businesses now operating at normal capacity and the number of closed businesses falling. These conditions are anticipated to continue to improve as the year wears on.
Seller Market Sentiment Hits Record Lows
After record highs in seller market sentiments in 2018 and 2019, this year’s sentiment took a nose dive reaching new lows across all market segments. The lower market seller sentiment dropped below 50% for the first time since data began being tracked in 2012. Businesses valued at $5 million to $50 million saw the largest quarter over quarter drop of 39% but all segments were significantly impacted.
Realized vs Asking Price
The overall transaction market environment remains competitive despite economic conditions. There are fewer active buyers in the market, however, the decrease comes in lock-step with a decrease in the number of potential deals circulating. Favorable opportunities exist for well-positioned companies, particularly those seeking private equity investments.
Multiples March On
Median Multiples Paid remained strong through Q2 2020 overall, except for the smallest sector of businesses valued below $500K. These businesses dipped below the 2.0 mark to a new historic low.
Industry by Market Sector
This chart displays the top three industries for each market sector based upon second quarter business sales.