In the 2023 First Quarter MarketPulse from the International Business Brokers Association (IBBA) and M&A Source, they surveyed almost 400 business brokers and M&A advisors to find out more about reported market conditions and how they impacted sales in the lower middle market and for Main Street businesses.
The fact of the matter is that changes are more likely to take place in the lower middle market. These businesses can be nice targets for both strategic buyers as well as financial buyers. On the other hand, business valuations tend to hold steady on Main Street.
When deals start to exceed 5 million, the data showed that there tends to be more issues caused by financial markets. For example, reactions to higher interest rates begin to be reported.
A seller’s market is when demand is more than the supply. During seller’s markets, buyers must compete to win deals and this increases values. There are typically more buyers than deals that are available and, as a result, sellers receive favorable terms. In the first quarter of 2023, there was surprisingly a significant dip in what was previously a strong seller’s market. It is interesting to note that these are the lowest levels since the pandemic.