This report is the result of business brokers surveyed July 1-15, 2020 about their experiences with clients in the second quarter of 2020. Here are some of the interesting findings:
The overall M&A market continues to be resilient although sellers face delays and some obstacles in Q2 2020.
- For businesses with a valuation from $2 million to $50 million, approximately one-third of the deals were delayed. Approximately 40% were unaffected. The balance (10-16%) were cancelled.
- Delays were attributed to buyers (40-51%), sellers (26-28%) and bank financing (15-24%).
- Overall, advisors predicted the market wouldn’t return to pre-March 2020 levels until Q1 or Q2 2021.
Some lenders are focused on managing their existing portfolios and modifying their risk profile for lending to a somewhat more conservative position. We’ve heard that from some family office and private equity investors as well. Lenders were challenged to deal with all of the government programs and are only now coming out of the emergency response mode that was necessary to be responsive to their communities.
In the landscaping industry, as an essential business, there has not been much, if any, of a slowdown in deal-seeking and deal-making activity. This is in spite of the fact that other factors including riots, protests, election activity and state shutdowns have also required businesses energy and attention in many parts of the country.
In Q2, 2020, median final selling prices came in from 89% to 100% of the pre-set asking price. Companies with enterprise values from $5-50 million came in highest at 100% of asking price.
Buyers are traveling less, and some selling companies may get more attention than they might have before the pandemic.
We expect to see more Sellers being asked to participate in sharing the risk of future economic uncertainties in the form of purchase price paid as earnouts and/or contingent payments. Strong companies of size in the landscaping industry may be well positioned and receive more buyer competition, leading to more cash at closing from buyers.
If you would like to discuss your situation on a confidential basis, please call Alison at 224-688-8838 or email me at [email protected]. We’re here to help you Harvest Your Potential.
Thanks and credit given to IBBA and M&A Source for these MarketPulse survey results.