Industry group M&A Source recently released their quarterly survey of transaction data on the sales of lower middle-market businesses, analyzing sales of over 250 privately held companies sold between March and June this year. Key findings include….
- Consistent with general market optimism, valuations are on the rise. Average multiple for businesses valued $5 million and up was 5.9x EBITDA in Q2 2018, compared to 5.4x in Q2 2017.
- The amount of cash at closing also increased. For transactions valued between $2 million and $5 million, cash increased to 82%, compared to 78% in Q2 2017.
- Time to close after signing a letter of intent also increased slightly, from 3.5 months in 2Q 2018, compared to 3 months in 2017. This could be due to buyers completing more due diligence, given higher valuations.
Bear in mind, these are averages for all types of businesses across the US. Valuations and deal terms always vary significantly, depending on the business type, size, growth, profitability, location, buyer, and many other factors.
But the survey shows that on average, valuations and cash are generally increasing -- which is consistent with our experience selling lower middle-market businesses in the tri-state area.
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