–SINCE 1982–

Transaction Metrics

As a member of several M&A industry associations, our firm receives a fair amount of industry information relating to transaction data.  This month’s article, which was compiled by Scott Densmore, one of our experienced Brokers, highlights some of the 2019 Q4 information, as reported in the Fourth Quarter 2019 Market Pulse Survey. Below are two significant items of interest:

It is still a Sellers’ Market in most segments.  The recent lowering of interest rates may prompt some buyers to take advantage of the lower rates to capture higher a cash flow and obtain better rates of return on their investment.

The length of time that it takes to close a transaction, particularly on smaller transactions, has increased significantly.  We attribute this increase to more stringent due diligence by buyers and the increased usage of SBA funding on smaller transactions.  Having accurate and timely financial data can significantly help streamline the closing process.

There seems to be a lot of uncertainty and pessimism going around, but one place where we can currently find a generally positive outlook is the business sales market. Currently, multiples of earnings are at or near peak levels. Also, advisors on the front lines are expecting to see greater deal flow and better closing rates as we proceed with 2020.

While sentiments are high, the time that it takes the average business to get to the closing table has also increased. As you can see in the chart below, time to close can be significantly affected by the due diligence process that takes place from LOI to close.

Deals under $500,000 saw the largest increase in time to close. One factor that could contribute to this is that arranging financing for acquisitions of this size has been increasingly difficult to obtain. It appears there is more than enough money available for acquisitions, but the relatively small size of these transactions may not be providing the proper incentives for bankers and investors.

Even with a small correction on the upper end when compared to last year’s numbers, the good news is that we are still solidly in a seller’s market for most market segments.

A breakdown of sales by industry shows that Restaurants and Personal Services are leading the Main Street Market (>$2M transactions size) and that Manufacturing and Construction are leading the Lower Middle Market ($2M – $50M transaction size).


Confidence in these above-mentioned industries appears to be an indicator of a generally optimistic outlook for progress and growth in 2020. Market conditions are constantly changing and there may be local nuances that may affect your specific business. If you have questions about your industry and size of business, call The FBB Group, Ltd. to speak with a Business Intermediary. Initial consultations are confidential, no cost and no obligation.

Published by The M&A Source

(originally published in the March 2020 eNewsletter)