M&A Market Update - Q3 2024
As we head into the second half of 2024, the market for selling businesses is still strong, especially for those with solid numbers and a good growth story. In this Q3 update, we’ll explain why now is a good time for business owners to think about selling and how private equity is looking at new areas. Below are the key points every founder thinking about selling should know.
3 Key Highlights for Business Sellers
Growing Interest from Private Equity and Strategic Buyers
Private equity (PE) firms are now looking at smaller businesses, either as "add-ons" to the companies they already own or as new "platforms" they can build on. They used to avoid companies making less than $2 million in EBITDA, but now they’re interested in those earning between $500,000 and $1.5 million. Strategic buyers—companies in the same industry—are also looking for businesses that can help them expand or add new products. This change means more businesses are becoming targets. It’s not just tech and health companies getting attention—industries like construction, trades, and engineering services are also in demand.
Plenty of Money for Buying Businesses
There’s a lot of money available for buying businesses right now. Private equity firms alone have over a trillion dollars, and there’s even more money with other buyers, like family offices and strategic buyers. This makes it a great time to sell because many companies are competing to buy good businesses. This competition could lead to multiple offers, which helps sellers get better deals.
Standing Out in a Crowded Market
Businesses that stand out—those with steady income, solid finances, and clear growth plans—are the ones that attract the most interest. Buyers especially like companies that offer something new or have big growth potential. If your business can show that a buyer could make two to five times their investment, you’ll be in a strong position.
Key Terms to Know
Private Equity (PE): These are investment companies that buy businesses, improve them, and sell them for a profit. Lately, PE firms are more interested in smaller businesses, giving owners more chances to sell.
EBITDA: Earnings Before Interest, Taxes, Depreciation, and Amortization. A measure of a company’s operational performance and cash flow, often used by buyers to evaluate the value of a business.
Strategic Buyer: Typically a competitor or company in a related industry that acquires businesses for strategic advantages, such as expanding product lines, entering new markets, or acquiring technology.
The market is shifting, and the next few months may offer a great chance to sell your business. Even though the period from November to January can be a bit uncertain, the outlook for 2024 is positive, and the market is picking up now. Valuations are stabilizing, meaning buyers are feeling more confident. If your business has steady income and growth potential, this could be the perfect time to start talking to buyers.
