Q2 2015 Survey Shows Small Business Owners are Selling Mainly Due to Retirement
LOS ANGELES, Sept. 3, 2015 —The first half of 2015 is starting off strong according to a national survey of business brokers and M&A Advisors who aid small business owners and buyers in selling and buying businesses. The study, the Market Pulse Survey published by the International Business Brokers Association (IBBA), M&A Source and the Pepperdine Private Capital Market Project, shows 36 percent of respondents report closing more deals in the first half of 2015 than the same time period last year, while only 26 percent reporting a decline. More than one-half (54 percent) of respondents indicated client growth is on pace to exceed 2014.
For two years, Market Pulse Survey data shows brokers have consistently judged Main Street’s smallest sector (<$500,000 in revenue) to be a buyer’s market. In Q2 2015, 62 percent of brokers characterized the Main Street businesses under $500,000 as a buyer’s market, while larger companies – those valued from $1 million and above – were characterized as being in a seller’s market. During the same time period, from Q1 2013 to Q2 2015, valuations in the <$500,000 sector stayed constant, with a median multiple of 2.0 in each quarter.
“Stronger economic headwinds finally seem to be filling all sails for business brokers as the year progresses,” said Scott Bushkie, president, Cornerstone Business Services. “Buyers for small business, particularly at or below $500,000 in revenue, continue to be well positioned compared to those seeking harder-to-buy larger businesses.”
“As businesses get larger, they typically face less competition, a key factor that can push a business toward a seller’s market,” says Lisa Riley, LINK Business-Phx, CBI. “Meanwhile, most times there is a glut of businesses in the smallest market segment. Even though the market is active, buyers are going to maintain the advantage and multiples paid won’t fluctuate much.”
The study also found retirement leads as the number one reason to sell across Main Street sectors followed by new opportunities, burnout and family issues. Those businesses with less than $500,000 in revenue, 39 percent reported selling due to retirement, 21 percent said burnout, 14 percent new opportunities and 6 percent family issues. Additionally, retirement continues to lead as the number one reason to sell in the lower middle market, accounting for 52 percent of new engagements in the $2 million-$5 million sector and 31 percent in the $5 million-$50 million sector. Retirement was followed by burnout at 20 percent and recapitalization at 27 percent in each category, respectively.
“As the general population ages, an increasing number of older small business owners appear to be ready to exit the business,” added Bushkie. “I can imagine, after enduring a prolonged recession, many small businesses owners are ready for a new adventure in retirement.”
Additional Key Findings:
About International Business Brokers Association (IBBA) and the M&A Source
Founded in 1983, IBBA is the largest non-profit association specifically formed to meet the needs of people and firms engaged in various aspects of business brokerage, and mergers and acquisitions. The IBBA is a trade association of business brokers providing education, conferences, professional designations and networking opportunities. For more information about IBBA, visit the website at www.ibba.org.
Founded in 1991, the M&A Source promotes professional development of merger and acquisition professionals so that they may better serve their clients’ needs, and maximize public awareness of professional intermediary services available for middle market merger and acquisition transactions. For more information about the M&A Source visit www.masource.org.
About Pepperdine University Graziadio School of Business and Management
A leader in cultivating entrepreneurship and digital innovation, the Graziadio School of Business and Management at Pepperdine University focuses on the real-world application of MBA-level business concepts. The Graziadio School provides student-focused, globally-oriented education through part-time, full-time, and Executive MBA programs at our six California campuses, as well as through online and hybrid formats. In addition, the Graziadio School offers a variety of Master of Science programs, a Bachelor of Science in Management degree completion program, Presidential and Key Executives MBA and executive education certificate programs. Connect with the Graziadio School by following the links: Facebook, Twitter and LinkedIn.
Scott M. Bushkie, Marketing Chair
Principal, Cornerstone Business Services, Inc.
Pepperdine University Graziadio School of Business and Management
Director, Marketing and Communications