For Main Street (enterprise value $0-$2M) and Lower Middle Market Businesses ($2M – $50M)
Input from business advisers* surveyed this quarter reinforces the message that the current M&A market is very active, deal volume has increased steadily since the low of Q2 2020 and the seller-market sentiment is back to levels from before the pandemic. Drivers include business economic stimulus, low interest rates, more buyers than sellers, and declining unemployment.
Given these circumstances, deal activity is expected to continue at a high level allowing those who may have considered selling before to exit. There is also some concern among sellers that changes to tax law may be coming and they want to beat those changes.
Multiples for Purchase Price of Q2 Businesses
All of this leads to increasing business values, especially in the tier of companies valued in the $2M-$5M range. Multiples in that group overall saw an increase of half a point. Multiples climbed in the lower middle market due to the number of buyers competing for quality deals. In these cases, buyers continue to have money they want to put to work.
Cash at Closing
Also, according to the survey, there is an uptick in cash at closing in most sectors, reflecting both the sellers’ market and the buyers’ strong financial positions.
Strategic buyers continue to be active in all segments, especially in “main street sized” businesses and the lower middle market segment. Main street companies’ buyers are first-time buyers, serial entrepreneurs, and existing companies who are looking to buy a job or gain a horizontal add-on in their area. In the lower middle market group, buyers are existing companies, private equity, and serial entrepreneurs motivated to acquire add-ons to existing platforms (both horizontal and vertical add-ons).
Many landscape companies that are committed to growth are increasingly looking at opportunities to acquire as part of their strategy. With baby-boomer owners seeking to exit their businesses, the restrictions in the labor market, the access to capital to make a purchase, and the need to scale up to in size to remain competitive, the time is ripe for landscape company owners to consider buying or selling, depending on their circumstances.
If you’d like to further discuss your company’s opportunities to acquire, sell or prepare your company for sale or create an overall plan for exiting your business in the future let’s have a conversation. In addition, we can help you determine your readiness for sale, or help with an existing acquisition.
I can be reached anytime via email: [email protected] or phone at: 224-688-8838.
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*IBBA & M&A Source Market Pulse Survey Report Q2 2021