BTA Market Update
The Situation
President of BizBuySell, Bob House, recently sat down with Business Brokerage Press to discuss the question on the minds of many business brokers, business buyers, and sellers: What will 2021 and beyond bring for the business sale (M&A) market? House provided a range of insights stemming from BizBuySell’s 3rd Quarter Insight Report and a survey of over 2,300 business owners.
It probably goes without saying that the pandemic has had a major impact on the buying and selling of businesses this year. The report suggests a market driven by opportunity seekers and business owners either well-positioned to profit or forced to exit.
Let’s dig into some of these insights.
The Details
Q3 M&A transactions dropped 16%; however, the financials of businesses that sold showed solid growth:
- The median sale price of businesses sold in the 3rd quarter grew 20% versus a year ago.
- The median revenue of sold businesses grew 14.2%.
- The average multiple of cash flow remained nearly the same as a year ago at 2.41 versus 2.37 so it was the higher cash flow that drove up selling prices.
These numbers suggest that:
- Buyers are paying a premium for resilient businesses.
- Negatively impacted businesses, which would have likely sold prior to the pandemic, are now having difficulty selling or staying out of the market altogether.
Buyer Sentiment:
- 57% of buyers believe they can buy a business for a better value than last year.
- This is a dramatic turn as just 17% believed the same when asked in 2019.
Owner Sentiment:
- Owner confidence fell to a low of 45, down from 52 in 2019, with the primary driver being concerns over business value.
- Owners validate buyer sentiment, with 68% surveyed believing they would have received a better value if they had sold last year – almost double the 37% surveyed in 2019.
- 71% of these owners pin their lower value on being impacted by the pandemic.
The Bottom Line
The effects of the pandemic have certainly been felt across the M&A market, but deals are still getting done for resilient, high-quality businesses. “Even in a pandemic, the fundamentals of an attractive business do not change. As long as these profitable, stable operations are available, plenty of buyers will be waiting,” said one surveyed business broker.
“Many … in the business brokerage industry believe 2021 will be the perfect storm for business sales. With each passing day, 10,000 Americans turn 65, many of whom are owners with excellent businesses. The pandemic has been a signal for the owners to let someone else steer the ship,” according to another broker.
If you’re ready to cash out of your business, it’s the perfect time to position your business and yourself for a successful exit – whether to external or internal buyers. Get educated on all the options that may be available to you as you seek to preserve the continuity of your company, maximize business value, and achieve your personal, long-term goals.
Join us for our next webinar:
Wed, Jan 6, 2021
12:00 PM - 1:00 PM EST
We will also discuss our new EXPERT Mastermind Group that will launch in early February. Participants will learn best practices from our work with more than 100 owners.
You will also learn from your peers – other owners who are also planning their business exits. We will guide you through your own exit planning process, answer all of your questions, and keep you on track.
