Results of the quarterly IBBA and M&A Source Market Pulse Survey for businesses being sold (all industries) in the Main Street (values $0-$2MM) and the lower middle market (values $2MM to $50MM). 

Deal activity continued to increase through the end of 2021, with more incoming deals and completed engagements on the horizon for 2022, according to 416 business brokers and M&A advisors.  Increasing average multiples are evidence of the strong market, particularly for companies in the $5 million to $50 million value range.  Time to closing also shrank in nearly all market segments, with sellers pushing to close before year-end, and hopefully avoid the impact of any tax law changes (capital gains rate, estate tax changes to drop limit, etc.) that may occur in 2022.  

Factors contributing to this very strong demand include:

  • Competition among buyers for certain types of companies.
  • A very large amount of “dry powder” needing to be invested/re-invested favorable cost of debt.
  • Competitive labor market (buyers are “buying” the employees they need).
  • The looming specter of the need to increase taxes to pay down debt incurred with COVID recovery programs.
  • Baby boomers continue to exit their businesses. 

Business values are holding steady for Main Street sized ($0-2MM revenue) entities.  Multiples varied from 2-3.3 times SDE (Seller’s Discretionary Earnings), consistent with most other surveys in past years.  For businesses with enterprise values of $5 -50MM, the average multiple was 6.0 x EBITDA.   We are in a seller’s market as demand for businesses exceeds supply.  Buyers are competing to win deals, and this is pushing values up and improving deal terms. 

It is interesting to note that in 2021 more than half of all small business sellers were planning to retire.  Even though the main reason for these companies to sell is retirement, most have not engaged in a proactive planning process.  Business owners who are planning for their exit will increase their ultimate value realized.  You may also find it interesting that this large increase in growth in owners seeking to exit, many brokers and advisors are less likely to take on engagements that are unlikely to sell or unlikely to meet a seller’s inflated price expectations. 

If you’ve been thinking this might be the time to sell, you may be right.  If you’ve been preparing your company for sale, your timing for going to market right now is ideal.  It might be that you want to sell to insiders, get an idea of the value of your business, or you want to buy another business.  If you want to talk through some of these and get to next steps, let’s talk. 

I can be reached via email: [email protected] or phone at: 224-688-8838.

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Alison Hoffman

has more than 25 years of experience in strategy, operations, mergers and acquisitions and delivering business-to-business client solutions. Her areas of expertise include managing operations for profitable growth, organizational design and strategy activation. She brings a wealth of experience through her work in evaluating, valuing and purchasing over 30 companies, leading company-wide cultural and business integration projects and consolidating best practices among business processes and corresponding computing systems. Read Full Bio