Market Pulse* Report for Q2 2022. Market Conditions for Businesses valued up to $50M. 

The good news is that buyers are continuing to compete for good businesses.   

The survey results indicate that the market for Main Street (up to $2 million enterprise value) and lower middle market ($2 million to $50 million) remains strong.  This is despite uncertainty related to market conditions, especially regarding labor issues, inflation, and continued supply chain issues.  Business valuations held steady in both markets.  While we are beginning to hear that the peak pricing in this market cycle occurred in December of 2021, market sellers are still receiving 100 to 106 percent of benchmark prices in the lower middle market.  

For smaller sellers, with an enterprise value of up to $2 million, the survey reports that the most likely buyers will be: 

  • first time buyers who may be looking to buy a job, 
  • serial entrepreneurs or 
  • existing companies who want to gain a horizontal or vertical add-on or t
  • existing companies seeking to gain a better ROI than other investments.  

The larger sellers are more attractive targets to financial and strategic buyers.  In fact, private equity firms are looking at opportunities in the lower middle market, competing with strategic buyers for both platform deals and “tuck ins” to existing platforms.  If you have a business with an EBITDA of $1 million, you may have more potential buyers, or it may be possible for you to attract an investment from a PE firm allowing your management team to run the company without having to fund the entire price themselves.  

In both cases, we continue to see a strong market.  Buyers are averaging more than 80 percent cash at closing and the time to sell a business shrunk to a 6.5 to 9-month time frame, with 60 to 120 days spent in due diligence and execution, after receiving a signed LOI.  The faster time to close is another sign of the competition in the marketplace.  Sellers can expect a shorter timeline to closing and buyers are responding.  There is an uptick in owners coming to market now which is not unexpected.  The number one reason owners give for selling is retirement.  Many Baby Boomer business owners would like to exit their business before the next downturn or uncertain macroeconomic event. 

So, while the seller’s market may be tightening up in the future because of interest rate hikes affecting the buyer’s cost of money, there is still plenty of “dry powder” that buyers are seeking to invest.  The continued labor shortages can act in a seller’s favor with companies seeking to buy skills via acquisitions rather than building them organically.  Of course, this requires that the seller’s employees and managers are committed to the new owner.  Long term incentive plans built to retain and award key employees and managers are a helpful component for the seller to consider.  

If you’d like to discuss selling your company, what you could expect in terms of a timeline, or how a business owner would make the decision to sell, please give me a call or email. 

You can reach me via email: [email protected] or on my cell phone a: 224-688-8838.  

We’re here to help you Harvest Your Potential!

*This is a quarterly national survey of business brokers and M&A advisors conducted by the IBBA and M&A Source to gain an accurate understanding of businesses being sold in Main Street (values $0-$2 million) and the lower middle market (values $2 million to $50 million).  

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