Private Equity Groups Steal Spotlight In Largest Deal Category
The latest survey from the International Business Brokers Association (IBBA) shows that in the smallest deal category (businesses valued at <$500K), first time buyers accounted for the largest buyer segment (59%). And in the largest deal category (businesses valued between $5-$50M) private equity made up the largest buyer group (40%). Individuals accounted for only 26% of buyers, and 50% of those were repeat business owners, the results showed.
The Second Quarter Market Pulse Survey said that buyers typically are sourced from a wider geographic area as deal size increases. This quarter’s results supported that notion—as deal size increased, the market saw fewer successful buyers within 20 miles of the seller and more buyers located beyond a 100-mile radius.
Experts say that the idea of contacting your competitor down the street will work for smaller businesses, however, larger businesses have less success with that strategy. Those companies really need to work with an experienced business advisor like Andrew Rogerson who has the proper reach and resources to market these businesses to the widest possible pool to attract more buyers.
The survey found that buyers in the Main Street market are most frequently motivated by a desire to buy a job—in other words, the seller wants to leave corporate America and be active full-time in the business. Those buyers in the lower middle market were found more often to be expanding an existing business through a horizontal or vertical add-on.
Top Industries by Market Sector
According to the Second Quarter Market Pulse Survey, an examination of the overall market showed manufacturing, personal services, and business services were among the hottest industries.
“For years, people have talked about manufacturing being dead and jobs going overseas, but there is a resurgence in the U.S.,” said Craig Everett, PhD, director of the Pepperdine Private Capital Markets Project. “In the lower middle market, manufacturing is very much a sought-after industry, as it’s been the number one or two market leader for the last year or two. We see it every day: manufacturing businesses are busy, profitable, and in-demand.”
For transactions less than $500,000, personal services, restaurants, business services, and retail were the most active industries; the range of $500,000 – $1MM had similar results but a different order in the top industries: business services, personal services, and restaurants. Manufacturing showed up at or near the top of the list in all the remaining segments. For business transactions of $1MM – $2MM, manufacturing was first followed by consumer goods/retail, personal services, and business services; in deals of $2MM – $5MM, manufacturing was at the top, then construction/engineering, consumer goods/retail, personal services, and business services. Finally, in the largest segment—$5MM – $50MM—information technology led the way, with manufacturing next in line, followed by healthcare and biotechnology.
About International Business Brokers Association and the Survey
IBBA was founded in 1983 and is the largest non-profit association specifically created to meet the needs of people and firms engaged in 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.
The Q2 survey participants were members of the IBBA who answered 25 questions. The IBBA received 293 completed responses that were collected from July 3-18, 2017.
Get Local Sacramento Business Advice
If you would like more information on business transaction strategies, this link will allow you to buy and download a copy of Sacramento business advisor Andrew Rogerson’s book Successfully Buy Your Business.