Highlights from the Market Pulse Survey – Q2 2023 Report
This survey is created by IBBA and M&A Source to gain an accurate understanding of the market conditions for all types of privately held businesses (not just landscaping) being sold on Main Street (enterprise values of $0-2mil) and the lower middle market (enterprise values from $2 mil to $50 mil). It was conducted July 1-16, 2023.
Key highlights are as follows:
- Private equity groups continue to move down market in response to the competitive pressure for deals.
- The higher cost of financing for deals makes it appealing for buyers to find smaller deals that are strategic add-ons. Smaller deals are easier to find and easier to finance.
- Lenders are reluctant to finance larger transactions with the continued uncertainty about the economy and desire to minimize risk.
- Year over year trends show a slight increase in cash at closing with the exception of companies that sold between $5mil and $50 mil.
- Seller financing for approximately 10% or more remains common practice for all of the transaction sizes in the survey.
- For the Main Street market, first time buyers are more active, while strategic buyers and PE firms become more prominent as deal size increases. Buyer motivations shift from job acquisition in the lower value ranges (up to $2mil) and an increasing emphasis on strategic expansion in the higher value segments.
- One of the driving factors for M&A activity in construction and engineering is the $1.2 trillion Infrastructure Investment and Jobs Act, signed into law in November of 2021. That is expected to create a significant amount of demand for construction, and includes specific references to landscaping initiatives. (Reference the ASLA for details). That is driving up valuations which may prompt sellers to exit.
Just as in construction, the landscaping industry is driven by the need for scale. In order to compete businesses are looking to grow through acquisition, rapidly expanding their service areas, diversifying their offerings and reducing their costs. This was certainly evident in the Top 100 and Technology Conference last week, and in the industry news on a weekly basis.
The bottom line is that there is a continued interest from buyers and sellers in making a deal, in spite of the current interest rate environment. The higher interest rates have tended to negatively impact valuations, but there are large amounts of investable capital remaining to be put to work, especially in the landscaping industry.
If you’d like to discuss selling your business, how to get started with your exit plan or ways your company can maximize its value, we’d be happy to have a confidential complimentary conversation with you about these or any other exit/sales/buying issues.
You can reach me via email: [email protected] or on my cell phone a: 224-688-8838.
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