Q1 2019 M&A Market Trends from Bizbuysell Insight Report

The following market trends were take from the Q1 2019 Bizbuysell Insight Report, a nationally recognized economic indicator that aggregates statistics from business-for-sale transactions reported by participating business brokers nationwide.

Small business transactions for 1Q19 experienced a slight decline of 6.5% compared to Q1 2018. It is important to note that 2017 and 2018 were record years for small business transactions and that Q1 2019 had the second most transactions of any Q1 (2,504 transactions), behind Q1 2018 (2,678). The factors that are potentially interrupting deal growth include the recent government shutdown, low unemployment, record profits, deal financing, and general uncertainty around the impact of administration policies regarding tariffs, immigration, and health care. Despite this, Main Street business sales along with the multiples sellers receive, continue to stay strong. However, 2019 looks to continue the multi-year growth trend that has been seen in small business transactions. It is a positive indicator that there is no shortage of listed businesses for sale, with Q1 2019 listings up 6.1% year-over-year.

Small Business Financial Health
The small businesses sold in Q1 2019 represented strong financial standing with median revenue of sold businesses coming in at $540,000, up 6.5% from Q1 2018. Median cash flow saw a slight dip of 2.6%, but still held a strong value of $116,830. This slight decline in cash flow can partially be attributed to January’s government shutdown, which slowed foot traffic at business locations and delayed SBA loans. 18% of small business owners said that the government shutdown negatively affected their business and 40% said that they still have not recovered.

Small Business Values
The median sale price of these small businesses in the first quarter was $225,000, a decline of 8.2% from 2018. This decline in price can be attributed to a slight cash flow drop since last year or quite simply smaller size businesses being sold in Q1 2019. This quarter, owners on average have increased their listing prices by 4.6%, which may signal that owners are overly confident in what they believe their business is worth compared to what the market is actually willing to pay. This sentiment is part of the reason why the time on the market for businesses has increased during the last three quarters.

Industry Breakdown
Many industries have followed the overall trend of a lower number of transactions in Q1 2019. Retail business sales, however, had a strong bounce back after a slow Q4 2018, accounting for over a quarter of all the transactions. Restaurant transactions not only saw a strong increase from last quarter, but also a significant jump in average sale price from $152,500 to $180,000. Manufacturing got hit the hardest this quarter with a 16.2% decline in transactions. The manufacturing businesses that sold averaged lower revenues and cash flows than those from the 2018.

Market Outlook
“Despite the decline in reported transactions over the last two quarters, the market is still very active and continues to receive favorable tailwinds.” An increasing amount of retiring baby boomers looking to exit their businesses along, strong business fundamentals with several years of growing revenues and profits, and readily available financing at historically low rates, all serve as favorable tailwinds to this strong small business transaction market. This market is primed for the entrepreneurial-minded younger generation who is eager to be their own boss and run their own business. For the rest of 2019, as long as we continue to see favorable financing terms and high confidence between buyers and sellers then deals will continue to get done.

About the BizBuySell Insight Report
The BizBuySell Insight Report is a nationally-recognized economic indicator that tracks the health of the U.S. small business economy. Each quarter, BizBuySell analyzes sales and listing prices of small businesses across the United States based on approximately 50,000 businesses for sale and those recently sold, reporting changes in closed transaction rates, valuation multiples and other economic indicators for the small business transaction market. Closed transactions are reported to BizBuySell.com on a voluntary basis by business brokers nationwide. Each report includes real small business data on over 70 major U.S. markets and across 65 small business industries.

BizBuySell is the largest business for sale marketplace online, receiving over a million visitors a month. Since 1996, BizBuySell has offered tools that make it easy for business owners and brokers to sell a business, and potential buyers to find the business of their dreams. The website also features an extensive franchise directory as well as an easy-to-use business valuation tool.

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