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Survey: More Boomers are Looking to Sell Their Business

IBBA, Pepperdine University Survey Also Shows Clarity over Taxes and US Fiscal Situation Helping to Drive M&A Activity in 2013 (3-15-13)

The fourth quarter Market Pulse Survey Report by the International Business Brokers Association (IBBA), M&A Source, and Pepperdine University’s Graziadio School of Business and Management found that, for the first time, baby boomer retirement was the top reason driving business sales in all Main Street and lower middle market sectors. The second most common reason to sell was burnout for Main Street businesses and family issues for businesses in the lower middle market.

While the retirement of baby boomers has ranked high among sale motivators in recent years, the potential for tax increases was the main concern for many businesses owners last year.

“Baby boomer retirement will be a consistent trend, particularly now that 2009 is four years behind us for valuation purposes and the first boomers are now 67 years old,” said Carl E. Grimes, Chairman of The CBI+Team, member of (IBBA / M&A Source). Many boomers would have sold in 2009 or 2010 but they were blindsided by the recession and had to hold on much longer than they expected.”

The fourth quarter Market Pulse Survey Report (http://bschool.pepperdine.edu/privatecapital) shows that, overall, brokers and M&A advisors are more optimistic about business sales in 2013. Business sales are expected to pick up due to baby boomer retirements (35 percent), market clarity following the presidential election (20 percent) and the fiscal cliff resolution (14 percent).

“People might not like everything that happened in Washington over the last few months, but at least now they have the answers they need to move forward,” said George Lanza, president of Plethora Businesses and chairman of IBBA. “Combine the U.S. election and fiscal uncertainly with the financial mess over in Europe, and it’s not hard to see why many sellers were just sitting tight and waiting for the dust to clear.”

The Q4 survey also showed that large businesses take longer to close. In all Main Street sectors, the majority of companies (56 percent) sold in six months. For those in the lower middle market, the majority of closings were between eight months and two years.

“Companies in the lower middle market really need to be proactive,” says Kevin Dempsey, principal of Summa Financial Group and chairman of the M&A Source. “Burnout and family issues are leading reasons that these owners sell. But when it can take a year or more to sell a company, you don’t want to be reacting to negative triggers, especially as buyers put the most value on the last 12 months of business performance.”

Other key findings from the fourth quarter Market Pulse Survey:

  • Main Street M&A continues to shift away from a buyer’s market sentiment, suggesting a balancing of leverage in this sector. In Q4, 53 percent of Main Street brokers representing deals of $500,000 or less said they were operating in a buyer’s market. That’s a decline from 70 percent in Q2 and 60 percent in Q3.
  • Existing companies were the most common buyer in the lower middle market and the $1 million – $2 million Main Street sector. Individuals who had previously owned a business also played a prominent role in Q4, ranking second across most of the markets.
  • For companies under $1 million, most buyers were located either within the same metro area or same state as the selling business. But for businesses valued over $1 million, buyer distance jumped considerably with more than half (55 percent) coming from out of state.

The fourth quarter 2012 Market Pulse Survey may be found on the Pepperdine Private Capital Markets Project website at http://bschool.pepperdine.edu/privatecapital

Market Segments

Main Street Lower Middle Market
Less than $499K $2MM – $4,99MM
$500K – $999K $5MM – $50MM
$1MM – $1.99MM

About the Market Pulse Quarterly Report

The International Business Brokers Association (IBBA) and M&A Source, in partnership with Pepperdine Private Capital Markets Project, have set a goal to provide quality information on a quarterly basis in order to become the go-to source for Main Street and lower middle market transactions. The “Market Pulse Quarterly Report” gives business owners and their advisors access to current market conditions and trends regarding business sales across the country to help them make well-informed decisions regarding selling their business. It also gives business brokers and intermediaries timely and accurate data to help them build and maintain a successful and sustainable business.

About International Business Brokers Association (IBBA) and the M&A Source

Founded in 1983, IBBA is the largest non-profit association specifically formed to meet the needs of people and firms engaged in various aspects of business brokerage, and mergers and acquisitions. The IBBA is a trade association of business brokers providing education, conferences, professional designations and networking opportunities. For more information about IBBA, visit the website at www.ibba.org.

Founded in 1991, the M&A Source promotes professional development of merger and acquisition professionals so that they may better serve their clients’ needs, and maximize public awareness of professional intermediary services available for middle market merger and acquisition transactions. For more information about the M&A Source, visit the website at www.masource.org.

About the Graziadio School of Business and Management

Founded on the core values of integrity, stewardship, courage, and compassion, Pepperdine University’s Graziadio School of Business and Management has been developing values-centered leaders who advance responsible business practice since 1969. Student-focused, experience-driven and globally oriented, the Graziadio School offers fully accredited MBA, Masters of Science, bachelor’s completion and non-degree executive business programs for business professionals, entrepreneurs, managers and senior executives at all stages of their professional and personal development. More information: http://bschool.pepperdine.edu/newsroom

Media Contacts:

Scott M. Bushkie, CBI, M&AMI

Principal – Cornerstone Business Services, Inc.

IBBA – Marketing Chair

920-436-9890

sbushkie@cornerstone-business.com

www.cornerstone-business.com

Carl E. Grimes, Certified Business Intermediary, Fellow of the IBBA

Chairman- The CBI+Team

Member (IBBA / M&A Source)

(479) 770-8989

carl.grimes@cbiteam.com

www.cbiteam.com