4 Things You Need To Know About The Current Manufacturing M&A Market
Each quarter the IBBA and M&A Source present the Market Pulse Survey with the support of Pepperdine Private Capital Markets Project and Pepperdine Graziadio School of Business & Management. The report measures the current market conditions for businesses sold within the United States. Q2 2016 had some interesting insights for the manufacturing sector that every business owner should be aware of. The report revealed 4 things you need to know about the current Manufacturing M&A Market
1. Manufacturing Businesses Sold More Than Any Other Type Of Business
During the second quarter of 2016 more manufacturing companies were sold in the US than any other type of business within the $1-$5 million AND the $5-$50 million revenue category.
2. Multiples Are Trending Upward & Sellers Are Getting Close To Their Asking Prices
For lower middle market transactions multiples for Q2 ranged from 4.75-5.75. Businesses with revenues between $2-$50 million sold on average at 98% of their asking price.
For businesses with revenues between $2-$5 million, Sellers received 81% cash at closing, with 10% of the deal being financed by the Seller and the balance in an earn-out. Businesses with revenues between $5-$50 million sold with 76% cash at closing, 14% Seller financing and the balance in an earn-out.
3. Who Is Buying And Where Do They Come From?
For deals under $5 million, 42% are first-time buyers and 40% are repeat owners. At Accelerated Manufacturing Brokers, Inc., we found this percentage of first time buyers to be substantially higher for the second quarter. In fact, this is the largest category of buyer for us in all transactions between $2-$15 million.
For deals between $5-$50 million, the Market Pulse report showed 39% were sold to private equity firms and 30% to existing companies seeking expansion through acquisition.
For lower middle market deals, 41% of buyers come from more than 100 miles and an additional 39% come from more than 50, but less than 100 miles away. This statistic should be of paramount concern to those business owners seeking to engage an M&A or business brokerage firm. The company you hire needs to have more than a local audience to successfully sell your manufacturing company.
4. How Long Does It Take To Sell A Manufacturing Business?
For companies with revenues between $1-$50 million, the average time to close was 9 months with 4 months from acceptance of the Letter of Intent to closing. At Accelerated Manufacturing Brokers, Inc., we’re still experiencing a slightly lower average.
Mergers & Acquisition professionals dealing in lower middle market businesses generally believe that we are currently in a Seller’s Market. Manufacturing continues to dominate and are the most sought after businesses in the lower middle market. Clearly the current Manufacturing M&A Market is good news for retiring business owners.
What will YOUR Manufacturing Business Sell for? Who is the most likely buyer, and how long will it take to sell? Find out without cost or obligation by contacting Accelerated Manufacturing Broker’s, Inc., 908-387-1000, info@AcceleratedMfgBrokers.com or reach out to us via our website and we’ll contact you.
I feel the urge to emphasize how important it is that you don’t delay your exit planning. Our experience has demonstrated to us how hundreds of deals were never completed and businesses that are no longer with us because sellers waited too long to act in 2000 and 2008. We believe another recession is coming. Act now before the recession to maximize your retirement.
Start your exit planning today and don’t delay so you can benefit from this seller’s market.