IN THIS ISSUE: Letter From the 2020 Chair Working with Lawyers to Get Your Deal Closed The Hidden Power of Dual Agency 8 Tips to Improve Deal Pitches as Companies Embrace Remote Working Cultures Remembering What I Learned! Letter From The Chair Barry J. Berkowitz, PhD, CBI, M&AMI Finishing Strong It’s hard to believe […]
IBBA Q2 2020 Market Pulse Report
National Report: Move to Buyer’s Market and Increasing Earnouts Companies Continue to Sell
August 5, 2020 – LOS ANGELES – While many small business owners are struggling to keep their doors open, a recent survey of business brokers and M&A advisors reveals about half of small and medium business owners can no longer get to the closing table as they face cancellations or delays in selling their businesses again in the second quarter
According to the Q2 2020 Market Pulse Report published by the International Business Brokers Association (IBBA), M&A Source, business brokers representing small businesses valued at less than $2 million report 36% of their deals have been delayed and another 16% were cancelled due to the COVID-19 pandemic. Similarly, M&A advisors representing businesses valued between $2-$50 million said 37% of their deals had been delayed and another 10% were cancelled, an improvement from Q1’s 60% cancelled or delayed deals.
Year-over-year trends show a slight downtick in cash at close in most sectors with corresponding increases in seller financing and/or earnouts.
“We expected to see an increase in earnouts due to COVID-19. With potential new shutdowns ahead and ongoing economic uncertainty, earnouts represent a way for buyers to reduce risk,” said Lisa Riley, Principal, Delta Business Advisors.
Seller-market sentiment dropped significantly in Q2 2020. In the $5 million to $50 million sector only 39% of advisors described the market as a “seller’s market” compared to only 13% of advisors in the less than $500 thousand sector. Across all thresholds, seller-market sentiment is at record lows since the Market Pulse began in Q2 2012, indicating a strong buyer’s market.
“It will be interesting to see if this is just a blip or a true trend over the next couple of quarters,” said Robert McCormack, Managing Partner, Murphy McCormack Capital Advisors. “Private equity still has a lot of cash and ticking time clocks on their portfolios. Fundamentally strong businesses will still find buyers, despite the strongest headwinds we’ve seen since the Great Recession.”
About the Market Pulse Report
The Market Pulse Report compares conditions for businesses being sold on Main Street (values of $0-$2MM) to those being sold on the Lower Middle Market (values of $2MM-$50MM). The Q1 2020 survey was conducted April 1-15, 2020 and was completed by 416 business brokers and M&A advisors. Respondents completed 296 transactions this quarter.
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 or follow the IBBA on Facebook, Twitter and LinkedIn.
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 or follow the M&A Source on Facebook, LinkedIn and Twitter.
IBBA / M&A Source
Lisa Riley, PhD, CBI, CM&AP
IBBA Market Pulse Chair / Board Member
Principal – Delta Business Advisors
Kate Stretar, MBA
IBBA Director of Operations
IN THIS ISSUE: Letter From the 2020 Chair Building a Small Business Pipeline The Value Quandary of Selling an Existing Franchised Business Did Your Seller Prepare to Exit? If Not, Can You Help? Dealing with Landlords During and Post COVID-19 Letter From The Chair Barry J. Berkowitz, PhD, CBI, M&AMI As we head into […]
Independence, OH – May 1, 2020 – The International Business Brokers Association (IBBA) is pleased to announce this year’s Member Excellence Award recipients in recognition of their exceptional achievements in 2019. “This year’s honorees have proven themselves to be outstanding business brokers and it’s a privilege to recognize their accomplishments,” said IBBA Board Chair and […]