Sacramento area and National Business sales trends
Compared to a year ago (Q2 2015), the sale of businesses in the second quarter of 2016 were comprised of more small businesses according to the quarterly Market Pulse Report published by the International Business Brokers Association (IBBA), M&A Source and the Pepperdine Private Capital Market Project.
As a member of the M&A Source and a past member of the International Business Brokers Association, its important as a business intermediary and mergers and acquisition advisor to understand what’s happening in the local Sacramento, CA where I live but also the California market where I operate and the national market for comparison.
This year has been a very busy and successful year for the sale of local businesses in the Sacramento area as well as small business funding. However, when compared to data from the Q2 2015 Market Pulse Report, Q2 2016 data reflect an increase in smaller deal sizes. More than half (57 percent) of the deals that closed in Q2 2016 were valued under $499,999, whereas 50 percent of deals were valued under $499,999 in Q2 2015. Similarly, respondents report that 23 percent of deals in Q2 2016 were valued between $5 million and $50 million versus 34 percent in Q2 2015.
Sacramento area and national business sales trends quarterly report
The quarterly report found increased interest from first-time buyers who were foreigners, former corporate executives, or women, compared to Q1 2016 as well as previous years. A third of respondents said more foreigners (35.5 percent) and former corporate executives (29.5 percent) inquired about buying a business in 2016 than earlier in the year and 12 percent said that more women were in the market to buy a business.
“When the economic climate in Europe is unsteady we tend to see an increase in investors who want to put their capital into American investments,” said Craig Everett, PhD, assistant professor of finance and director of the Pepperdine Private Capital Markets Project. “The increase in women and former corporate executives who are interested in buying a business speaks to the notion that when someone is not ready to retire, but can’t find the right job sometimes the best approach is to simply buy a business and create your own perfect job.”
“Retirement continues to top the list of reasons that sellers go to market, but other factors such as looking for new opportunities, family issues, and health also motivate business owners to sell” said Andrew Rogerson, Certified Business Intermediary, President, Rogerson Business Services, Sacramento, CA, member of M&A Source. This is a shift from a year ago (Q2 2015) when 39 percent of respondents (compared to 27 percent in Q2 2016) cited retirement as the main reason for selling their business.
According to the report, year after year, advisor confidence in a seller’s market has remained steady or increased across all market sectors. Businesses in the smallest market sector (deals valued under $499,999) are positioned in a buyer’s market. Advantage shifts, however, as deals exceed $1 million in value. In the lower middle market (deals valued above $2 million), seller advantage sentiment is strong yet remains three to eight percentage points below peak since the Market Pulse Report began in 2012.
The Market Pulse Report compares conditions for businesses being sold on Main Street (values $0-$2 million) to those being sold in the Lower Middle Market (values $2 million -$50 million). The Q2 2016 Market Pulse Survey was completed from July 1-15, 2016 by 378 business brokers and M&A advisors representing 38 states.
Sacramento area and national businesses sold reports
There are two different reports available for you to read if you would like more information.
- Click the following link to read the first report. This report looks at the data from the second quarter of 2015 and compares it to the second quarter of 2016. The report is approximately 74 pages.
- Click the following link to read the second report. This report just focuses on the data that was collected for the second quarter of 2016 only. The report is approximately 99 pages.
The International Business Brokers Association (IBBA) was founded in 1983 and 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.
The M&A Source was founded in 1991 and 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.
The Pepperdine Graziadio School of Business and Management is a leader in cultivating entrepreneurialism and digital innovation. The Pepperdine Graziadio School of Business and Management 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 five Southern California locations and at our Silicon Valley, and Santa Barbara 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, and the Presidents and Key Executives MBA, as well as executive education certificate programs.
If you would like more information about selling a business, buying a business, buying a franchise or a related service such as valuing a business or getting an SBA loan, please visit my webpage Services and choose from the options available.
For more immediate help, you are welcome to send an email to Andrew Rogerson or give me a call on 916 570-2674.