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 below are credited to the Market Pulse Q3 2018 Report.
The 3rd Quarter Report for 2018 confirmed a continuation of a strong transaction market for Main Street and the Lower-Middle Market businesses. In the Lower-Middle Market, which includes businesses valued from $2MM to $50MM, the transaction market is highly skewed in favor of sellers with both strategic buyers and private equity firms competing over quality companies for which they are willing to pay a premium. This trend is expected to continue mainly the result of Private Equity Groups sitting on over $1 trillion dollars in funds to invest and businesses benefiting from a strong economy acting as strategic buyers who wish to drive company growth through acquisition.
This quarter’s report also touched on the importance of proper M&A Advisor representation, showing that IBBA and M&A Source Advisors are almost twice as successful at closing deals than the overall industry.
Both Main Street and the Lower-Middle Market are positioned to remain strong Seller’s Markets for the remainder of 2018.
With a strong Seller’s Market, cash at closing went up during Q3, allowing sellers to accept less risk on the transaction. Seller financing is almost always part of the deal, a way for buyers to ensure sellers remain engaged and see through a smooth transition as well as reduce buyer risk.
Report Charts & Highlights
Seller’s Market
Both Main Street and the Lower-Middle Market are positioned to remain strong Seller’s Markets for the remainder of 2018. A tight talent market is driving more businesses to target M&A for corporate growth while the private equity market remains awash with funds to invest.
Median Multiples
The median multiples across market segments have remained fairly stable over recent years.
Cash at Close
With a strong Seller’s Market, cash at closed went up during Q3, allowing sellers to accept less risk on the transaction. Seller financing is almost always part of the deal, a way for buyers to ensure sellers remain engaged and see through a smooth transition of the business as well as reduce buyer risk.
Exit Planning
Sellers remain under prepared for the exit of their businesses. Exit planning is vital to pose a company to command an optimal price an favorable deal terms when selling a business. Ideally, business owners should begin exit planning 3-5 years before they plan to sell.