Manufacturing Companies Top List of Small Businesses Bought in Q2 2017, According to New National Business Survey

Small business owners, wary of economic uncertainty, more realistic about their sales valuations. End Quote

Los Angeles-Long Beach, CA (1888PressRelease) August 29, 2017 - Continuing a four-year trend, manufacturing companies are the most sought-after business acquisitions valued in the $1 million - $5 million range, according to the Q2 2017 Market Pulse Report published by the International Business Brokers Association (IBBA), M&A Source, and the Pepperdine Private Capital Market Project.

The new quarterly survey shows high interest in the U.S. manufacturing sector among buyers of businesses in the lower middle market, despite national headlines about outsourcing of jobs and companies moving overseas.

“For years, people have talked about manufacturing being dead and jobs going overseas, but there is a resurgence in the U.S.,” said (Robert Dean, Certified Business Broker, Banner Business Sales Inc. and member of IBBA/CABB). “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 several years. We see it every day: manufacturing businesses are busy, profitable, and in-demand.”

Sales of business service companies dominated the $500,000 - $1 million segment, while among “Main Street” businesses (under $500,000), restaurants and personal services businesses were the companies most commonly purchased.

The Market Pulse Report also found that although 72 percent of the participants received multiple interests/offers on their most recent closing for their clients, the business marketplace is becoming more of a buyers’ market, most notably for businesses valued under $2 million, compared to the same quarter last year. This means that buyers have an advantage in price negotiation and sellers are realizing they have to be more realistic with their financial expectations.

“Political and economic uncertainty is causing the shift to a buyers’ market,” said John Howe, M&AMI, Director, Business Transition Strategies, M&A Source Chair. “Sellers are becoming anxious about closing their deals and as a result, they are becoming more lenient about the sale price and the terms and conditions.”

Retirement still the top reason for selling
A desire for retirement continues to be the top reason for selling a business. In the $1 million – $2 million sector, advisors reported retirement and burnout were equal motivators to sell, marking this as the rare quarter in which retirement wasn’t the absolute leading factor across every sector.

“We know from experience that a proactive exit strategy yields much higher business values than exiting in burnout mode,” said Lou Vescio, CBI, M&AMI, principal, Coastal Business Intermediaries, Inc., IBBA chair. “Unfortunately, most buyers only really care about the last year or so of business performance, not what you did when you were full of energy and going strong. Waiting until you’re burned out is a common mistake, and business owners can lose anywhere from 20 to 50 percent of value by waiting too long.”

“Corporate exodus” behind many small business purchases
The survey found buyers in the Main Street market are most often motivated by a desire to leave corporate America and become active full-time in a business.

###

space

Other Related Press Releases