Cash at close includes senior debt and buyer equity. Seller financing accounted for 15%-17% or more of most deals in Q4 2024. For deals valued between $5 million to $50 million, earnouts (6%) and retained equity (3%) also played a meaningful role in financing.
Advisors reported an uptick in seller confidence, although still well off previous peaks. (A seller’smarket occurs when demand exceeds supply. In a seller’s market, buyers compete in order to windeals. This typically translates to increased values and more favorable deal terms for the seller.)
Multiples remained consistent across the Main Street market. Meanwhile, advisors reported a meaningful increase in multiples (up a half percentage point or better, year over year) in the Lower Middle Market.
On average, sellers are receiving valuations at 85% of benchmark or better. As is the trend,businesses in the Lower Middle Market performed the best, receiving all or nearly the privatebenchmark they set with their advisors before going to market.
“Historically buyers would go back and look at three years’ worth of financials, but because that’s on the tail of COVID, many are asking for 2019 to current,” said Lisa Riley, CEO & Founder of Delta Business Advisors, LLC. “So many sellers are being asked to provide five years of… Read More »Buyers are largely disregarding the financial impact, whether positive or negative, that COVID-19 had on acquisition targets
Multiples remained relatively consistent across market sectors, with one notable exception. Advisors reported that businesses with enterprise value of $5M-$50M received an average valuation of 5.3x EBITDA, a meaningful jump over last year, but still down from the red hot market in Q4 2021.
On average, sellers are receiving valuations at 86% of benchmark or better. As is the trend, businesses in the lower middle market performed the best, receiving nearly all or above the private benchmark they set with their advisors before going to market.
“It’s difficult to say how election cycles impact M&A, as political policies don’t operate in a vacuum,” said Scott Bushkie, President of Cornerstone Business Services. “However, business owners generally expect a Democrat-led government will raise taxes. If the winds appear to be blowing that way, we could see more sellers… Read More »What will increase M&A Activity in 2024?
The lending environment is critical. If these dynamics shift, we hope to see lenders get a bit more flexible and increase their appetite for risk.
While we didn’t see a big shift in Main Street valuations, market confidence remained low in this sector. Sellers received less cash at close, meaning they had to rely on additional seller financing or alternative deal structures.And while sellers in the lower middle market benefited from a relative rebound in… Read More »Lending Conditions: How Has Senor Lending Changed