Easy capital and low interest rates contribute to extremely high business valuations in the current middle market sector, say buyers and experts.
Austin, TX – January 26, 2015 – In a poll of national firms buying businesses conducted by IBG Business, a nationally known M&A firm, the responses indicated exceptional market strength meaning superior times for business owners to sell. The consensus was strong in key business value areas, signaling seller’s market conditions will continue well into 2015.
Late last year professional buyers gathered at The M&A Source in Austin, Texas for personal meetings with top private equity groups representing over two billion in investible capital to acquire firms, including representatives of IBG, to analyze acquisition targets. IBG Business conducted an exclusive survey of the most active buyers to learn about their market assessment and their expectations for middle market business sales.
Respondents painted a rosy picture with strong consensus regarding middle market business sales in particular. The number of closely held business sales is expected to remain constant or increase from 2013 through 2015. Eighty percent of buyers polled reported business acquisitions being closed at all-time high valuations, based on profit multiples. Many business buyers reported this to be especially pronounced for quality businesses with earnings before interest, taxes, depreciation and amortization (EBITDA) exceeding $4 million
The extraordinarily high volume of easy capital in the current market has a major impact on valuations. Massive amounts of capital available to acquire high quality businesses contribute to the high levels of sales and valuations buyers and sellers are seeing today. Kyle Madden of Florida based KLH Capital, one of the M&A Source panelists, noted that more than $3 trillion is available for business acquisitions through private equity groups and corporate acquirers. This easy access, coupled with inexpensive costs for debt, is driving high valuation multiples among buyers competing for acquisitions.
The buyers IBG polled consistently commented that they expect the valuation multiples being paid to fall once interest rates begin to rise, which many experts foresee happening in the second or third quarter of 2015.
John C. Johnson, an IBG Business principal in Tulsa, concluded, “Today, a rare combination exists of available capital, low cost debt and high competition for deals. This creates an unusually strong market for business owners prepared to accomplish an exit plan. For now, it is a strong seller’s market for high quality businesses in the middle market.”
About IBG Business
International Business Group, LLC (dba IBG Business) is a nationally respected, award-winning leader in business sales and acquisitions of privately held middle-market companies. Founded in 1986, IBG Business brings 30 years of exclusive and proprietary skills and knowledge to assist business owners in valuing and selling their companies at the appropriate time, for maximum value. For more information, please visit: www.IBGBusiness.com.
About The M&A Source
The M&A Source® is the world’s largest international organization of experienced, dedicated merger and acquisition intermediaries representing the middle market. Since 1991, The M&A Source has addressed professional issues of merger and acquisition specialists. The organization has over 300 cooperating intermediaries active in middle-market transactions across the U.S., Mexico, Europe and other international locations. It provides education, networking, conferences, tools, peer-to-peer roundtables, deal making expos and other support specific to M&A specialists.