Q3 2017 Lower-Middle Market M&A Multiples

Posted On: 12-07-2017

Whether you’re considering an exit from your business or desire to make an acquisition, market data can provide meaningful insight into the current state of the market and what you may expect as either a seller or an acquirer.

With that in mind, the M&A Source recently published their Q3 Market Pulse survey in cooperation with the Pepperdine Capital Markets Project and the Graziadio School of Business and Management.

334 M&A intermediaries contributed to the Q3 2017 Market Pulse Survey and reported 266 completed transactions.  Some highlights from the study of the reported transactions are as follows:

Who’s Doing Deals?

The majority of the lower-middle market companies sold in Q3 2017 (75%) were acquired by strategic acquirers (existing companies or individuals that own existing businesses).  17% were completed by first time individual buyers and 8% were acquired as either a platform or add-on private equity acquisition.

What is Being Bought/Sold?

The majority of the completed lower middle-market transactions were comprised of manufacturing companies with the remainder made up of business services, construction and engineering.

What Multiples are Being Paid?

The median multiple paid by the acquirers of companies with between $2M and $5M in enterprise value was 4.5x EBITDA, a slight increase from the 4.3x median EBITDA multiple paid by buyers in this size range in Q2 2017. 

**All stated multiples include a normal level of working capital included in the sale of the business.  

The median multiple paid by the acquirers of companies with between $5M and $50M in enterprise value was 5.0x EBITDA, down from 5.4x EBITDA in Q2 2017 and 5.3x EBITDA in Q1 2017.  It’s important to note that although the study quotes the range of transaction values in this segment of the market as between $5M - $50M in enterprise value, a reader could reasonably assume, based on the business of the respondents, that the majority of the transactions reported were at the lower end of the enterprise value range.                    

**All stated multiples include a normal level of working capital included in the sale of the business. 

How Long are Deals Taking?

According to the study, intermediaries reported that the average timeframe for identifying the right acquirer and completing a transaction is approximately 9 – 10.5 months.  The average time from LOI to closing is approximately 3 – 3.5 months.

For more information on the study or to discuss your M&A needs, please contact Scott Mashuda, River’s Edge Alliance Group, LLC at (440) 915-3082 or, smashuda@RiversEdgeAlliance.com

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