market pulse report first quarter 2014 · market pulse report first quarter 2014 scott bushkie,...

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Market Pulse ReportFirst Quarter 2014

Scott Bushkie, CBI, M&AMI, IBBA Marketing Chair

Lisa Riley, Ph.D. IBBA Marketing Chair

Craig Everett, Ph.D., MBA Assistant Professor of Finance

Director, Pepperdine Private Capital Markets Project

2

This research was made possible with the support of the International Business Brokers Association (IBBA) and M&A

Source.

3

ACKNOWLEDGEMENTS

We’d also like to thank the following people at The GraziadioSchool of Business and Management for their contributions:

Dean Linda LivingstoneAssociate Dean David M. Smith

Mike Sims, Executive Officer, CERJohn K. Paglia, Associate Professor of Finance

Douglass Gore, Director of Public RelationsMark Chun, Director, Center for Applied Research

Bill Bleuel, Professor of Decision SciencesIrina Shaykhutdinova, Research Analyst

4

I. About the Market Pulse Report……….……….…………........5

II. Current Business Environment……………………….…..……7

III. Business Transactions Closed in the Last 3 Months……….11

IV. Business Transactions Terminated in the Last 3 Months…..99

V. Business Expectations…………………………………....….102VI. About the respondents………………..….………………..…105

Outline

5

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 Report” gives you timely and accurate data to help you

build and maintain a successful and sustainable business.

I.AbouttheMarketPulseReport

6

• 25 questions• Invited participants were members of the

International Business Brokers Association (IBBA),IBBAAffiliates/Chapters, and/or M&A Source

• 250 completed responses• Responses collected from April 1 to April 15, 2014

AbouttheSurvey

7

IV. CurrentBusinessEnvironment

8

CurrentlyActiveBusinessTransactions /Engagements byDealSize

0%

10%

20%

30%

40%

50%

60%

70%

80%

90%

100%

Dealsvaluedunder$499,999

Dealsvaluedfrom$500,000to$999,999

Dealsvaluedfrom$1million to$1.99million


Dealsover$5million

Wholesample 24% 26% 19% 17% 14%

9

BusinessTransactions That Are Currently inEscrow/Accepted LOI/Due Diligence byDealSize

0%10%20%30%40%50%60%70%80%90%100%





Dealsover$5million

Wholesample 26% 25% 19% 17% 13%

10

PercentageofBabyBoomersasNewClients

0%10%20%30%40%50%60%70%80%90%100%

Ofyournewlistingclientsin2014,whatpercentageareBabyBoomers?

Ofyournew'buyer'clientsin2014,whatpercentageareBabyBoomers?

65%

41%

11

II. BusinessTransactionsClosedintheLast3Months

12

NumberofBusinessTransactionsClosedbyRespondentsintheLast3Months

Numberofresponses=119

0

10

20

30

40

50

60

70

1 2 3 4 5 6 7 8 9Number ofRespondents 64 33 9 3 3 2 2 2 1

13

TypicalFeeStructure:DealsUnder$500,000

79%

15%3%1%1% 1%

Successfee/commision

Successfee/commission+upfrontretainer

Upfrontretainer

Successfee/commission+other

Successfee/commission+upfrontretainer+other

Other

14

TypicalFeeStructure:DealsBetween$500,000and$1Million

68%

21%

4%3%

1%

1% 1% 1%

1%



Successfee/commission+monthlyfee/consultingfeeSuccessfee/commission+upfrontretainer+monthlyfee/consultingfeeUpfrontretainer

Successfee/commission+other

Successfee/commission+upfrontretainer+otherUpfrontretainer+other

Monthlyfee/consultingfee

15

TypicalFeeStructure:DealsBetween$1Millionand$2Million

60%26%

5% 4%

2%1%

1%

1%



Upfrontretainer

Successfee/commission+monthlyfee/consultingfeeSuccessfee/commission+monthlyfee/consultingfee+upfrontretainerUpfrontretainer+other

Successfee/commission+upfrontretainer+otherOther

16

TypicalFeeStructure:DealsBetween$2Millionand$5Million

49%

26%

9%8%

2%1%

1%

1%

1%



Successfee/commission+monthlyfee/consultingfee+upfrontretainerSuccessfee/commission+monthlyfee/consultingfeeSuccessfee/commission+upfrontretainer+otherUpfrontretainer

Upfrontretainer+other

Successfee/commission+monthlyfee/consultingfee+otherSuccessfee/commission+monthlyfee/consultingfee+upfrontretainer+other

17

TypicalFeeStructure:DealsOver$5Million

44%

25%

11%

6%4% 3%1%

1%1%1%

1%



Successfee/commission+monthlyfee/consultingfee+upfrontretainerSuccessfee/commission+monthlyfee/consultingfeeSuccessfee/commission+upfrontretainer+otherSuccessfee/commission+monthlyfee/consultingfee+otherMonthlyfee/consultingfee

Upfrontretainer

Upfrontretainer+monthlyfee/consultingfee+otherSuccessfee/commission+monthlyfee/consultingfee+upfrontretainer+other

18

ChangeintheNumberofNewClientsbyDealSizeinTheLast3Months

Dealsize Greatlydecreased Decreased Stayed

thesame Increased Greatlyincreased

Score(1to5)

Dealsvaluedunder$499,999 3% 11% 39% 39% 8% 3.2

Dealsvaluedfrom$500,000to$999,999 2% 8% 42% 43% 5% 2.8

Dealsvaluedfrom$1millionto$1.99million 1% 11% 45% 38% 4% 2.5

Dealsvaluedfrom$2millionto$4.99million 2% 12% 44% 38% 5% 2.9

Dealsover$5million 3% 10% 44% 37% 7% 2.6

19

InthePast 3Months,Best Client Arrived by:


58%

12%

7%

6%4%

4%1% 8%

Referral

Networking

Coldcalling

Companybranding

Generalmailer

Targetmailer

Publication/mediasource

Other

20

TypesofReferrals

54%

17%

13%

11% 4%

Pastclient

Accountant

Financialadvisor

Attorney

Lender

21

Was it Buyer’s or Seller’s Market intheLast3Months?

Number ofresponses 107 112 95 84 70

0%10%20%30%40%50%60%70%80%90%100%





Dealsvaluedfrom$5million to$50million

Buyer'smarket 77% 63% 58% 40% 36%

Seller'smarket 23% 37% 42% 60% 64%

22

BusinessTransactionsClosedintheLast3MonthsbyDealSize

0%

10%

20%

30%

40%

50%

60%

70%

80%

90%

100%






Wholesample 56% 19% 10% 7% 8%

23

BusinessTransactionsofAllSizes,Comparison

24

MedianTimetoCloseaDeal(Months)

0

1

2

3

4

5

6

7

8

9

10

<500K 500K- 1M 1M- 2M 2M- 5M 5M- 50M

4

5

6

8

11

25

MedianSDEMultiplePaid

0.0

0.5

1.0

1.5

2.0

2.5

3.0

3.5

4.0

4.5

5.0

<500K 500K- 1M 1M- 2M 2M- 5M 5M- 50M

2.0

2.6

3.1

4.0 4.0

26

MedianEBITDAMultiplePaid

0.0

0.5

1.0

1.5

2.0

2.5

3.0

3.5

4.0

4.5

5.0

<500K 500K- 1M 1M- 2M 2M- 5M 5M- 50M

2.5

4.1

3.5

4.34.5

27

MultipleType

0%10%20%30%40%50%60%70%80%90%100%

<500K 500K- 1M 1M- 2M 2M- 5M 5M- 50MSDEincludingworkingcapital 28% 13% 5% 7% 0%SDEnotincludingworkingcapital 66% 66% 55% 43% 20%EBITDAincludingworkingcapital 0% 0% 20% 21% 40%EBITDAnotincludingworkingcapital 5% 16% 15% 14% 7%TTMEBITDAincludingworkingcapital 1% 3% 5% 7% 13%TTMEBITDAnotincludingworking

capital 0% 3% 0% 7% 20%

28

BuyerType

0%10%20%30%40%50%60%70%80%90%100%

<500K 500K- 1M 1M- 2M 2M- 5M 5M- 50M1sttimeindividual 47% 45% 40% 36% 0%individualwhoowned abusiness 33% 26% 20% 21% 13%existingcompany/strategicbuyer 18% 24% 30% 43% 20%PEfirm- Platform 0% 3% 5% 0% 27%PEfirm- Add-on 0% 3% 5% 0% 40%

29

#1Reason forSeller to Go to Market

0%

20%

40%

60%

80%

100%

<500K 500K- 1M 1M- 2M 2M- 5M 5M- 50MAcquisition 2% 0% 0% 0% 20%Burntout 21% 21% 5% 7% 7%Familyissues 7% 8% 0% 7% 13%Health 6% 0% 0% 21% 0%Newopportunity 13% 11% 15% 7% 20%Potentialtaxesincreases 0% 3% 5% 0% 0%Relocation/moving 12% 8% 0% 0% 7%Retirement 31% 39% 65% 50% 20%Unsolicitedoffer 1% 0% 0% 0% 7%Other 6% 11% 10% 7% 7%

30

#1MotivationforBuyer

0%10%20%30%40%50%60%70%80%90%100%

<500K 500K- 1M 1M- 2M 2M- 5M 5M- 50MBuyingajob 45% 42% 30% 29% 7%BetterROIthanotherinvestment 13% 11% 20% 21% 20%Verticaladd-on 8% 11% 10% 14% 20%Horizontaladd-on 23% 29% 25% 29% 47%Other 11% 8% 15% 7% 7%

31

FinancingStructure

0%10%20%30%40%50%60%70%80%90%100%

<500K 500K- 1M 1M- 2M 2M- 5M 5M- 50MBuyersequity 65% 37% 23% 18% 43%Seniordebt 15% 37% 49% 59% 29%Sellerfinancing 17% 23% 12% 12% 15%Earnout 1% 1% 3% 0% 3%Sellerretainedequity 0% 0% 4% 2% 5%Mezzaninefinancing 0% 0% 0% 0% 6%Other 3% 2% 0% 8% 0%

32

SourceofBuyersEquity

0%10%20%30%40%50%60%70%80%90%100%

<500K 500K- 1M 1M- 2M 2M- 5M 5M- 50MCash 84% 67% 70% 50% 67%401K/IRARollover 6% 8% 17% 8% 0%HomeEquityLineofCredit(HELOC) 5% 5% 4% 17% 0%Investors- family/friends 5% 15% 4% 17% 0%Investors- other 1% 5% 0% 8% 33%

33

ReasonsforTerminatedTransactionsintheLast3Months

0%10%20%30%40%50%60%70%80%90%100%

Lackofbuyerpreparation

Unrealisticvaluation

Unreasonabledemand(non-

price)

Personalityconflicts

Poorsellerpreparation

Minimalcorporatestructure

Seller'smisrepresenta

tion

Other

Dealsvaluedunder$499,999 11% 33% 15% 2% 11% 4% 9% 15%

Dealsvaluedfrom$500,000to$999,999 8% 31% 31% 0% 15% 0% 8% 8%

Dealsvaluedfrom$1millionto$1.99million 18% 36% 18% 9% 9% 0% 0% 9%

Dealsvaluedfrom$2millionto$4.99million 10% 24% 10% 5% 19% 5% 14% 14%

Dealsvaluedfrom$5millionto$50million 16% 16% 13% 10% 10% 6% 13% 16%

34

II-I BusinessTransactionsValuedunder$499,999

35

TimetoClose

Numberofclosedtransactions=112

0%

5%

10%

15%

20%

25%

30%

35%

40%

45%

50%

<1month

1month

2months

3months

4months

5months

6months

7months

8months

9months

10months

11months

12months

1.1- 1.5years

1.6- 2years

>2years

Dealsunder500K 4% 13% 18% 11% 13% 4% 9% 4% 4% 6% 4% 1% 1% 4% 2% 3%

36

Industry


0%

5%

10%

15%

20%

25%

30%

35%

40%

45%

50%

Restaurants Businessservices

Consumergoods&Retail

Services-personal

Services-financial

Healthcare&biotech

Construction&

engineering

Informationtechnology

Wholesale&distribution

Basicmaterials&energy

Manufact. Other

Dealsunder500K 21% 15% 14% 12% 9% 8% 4% 2% 2% 1% 1% 11%

37

SDEMultiplePaid


0%

5%

10%

15%

20%

25%

30%

35%

40%

45%

50%

0.25 0.5 0.75 1 1.25 1.5 1.75 2 2.25 2.5 2.75 3 3.25 3.5 5 7Dealsunder 500K 1% 2% 1% 11% 3% 6% 9% 24% 14% 8% 6% 9% 3% 3% 1% 1%

38

EBITDAMultiplePaid


0%

5%

10%

15%

20%

25%

30%

35%

40%

45%

50%

0.25 1.75 2.25 2.5 5 5.25 >8Dealsunder 500K 14% 14% 14% 14% 14% 14% 14%

39

MultipleType


0%

10%

20%

30%

40%

50%

60%

70%

80%

90%

100%

SDEincluding workingcapital

SDEnotincluding workingcapital

EBITDAnotincludingworkingcapital

TTMEBITDAincludingworkingcapital

Dealsunder 500K 27.7% 66.1% 5.4% 1%

40

BuyerType:Deals<$500,000


47.3%

33.0%

17.9%

1.8% 1sttimeindividual

individualwhoowned abusiness

existingcompany/strategicbuyer

Other

41



0%

5%

10%

15%

20%

25%

30%

35%

40%

45%

50%

Retirement Burnt out Newopportunity

Relocation/moving

Familyissues Health Acquisition Unsolicitedoffer

Other

Dealsunder 500K 31% 21% 13% 12% 7% 6% 2% 1% 6%

42

BuyerLocation(Distance)


0%

5%

10%

15%

20%

25%

30%

35%

40%

45%

50%

within 20miles within 50miles within 100miles morethan100milesDealsunder 500K 63% 17% 6% 13%

43

BuyerLocation(Global)


0%

5%

10%

15%

20%

25%

30%

35%

40%

45%

50%

within city within state within country international buyerDealsunder 500K 55% 29% 12% 4%

44



0%

5%

10%

15%

20%

25%

30%

35%

40%

45%

50%

Buyingajob Horizontal add-on Better ROIthanotherinvestment

Verticaladd-on Other

Dealsunder 500K 45% 23% 13% 8% 11%

45

FinancingStructure


0%

10%

20%

30%

40%

50%

60%

70%

80%

90%

100%

Buyersequity Sellerfinancing Seniordebt Earnout OtherDealsunder 500K 65% 17% 15% 1% 3%

46

SourceofBuyersEquity(MultipleChoices)


0.0%

10.0%

20.0%

30.0%

40.0%

50.0%

60.0%

70.0%

80.0%

90.0%

100.0%

Cash 401K/IRARollover HomeEquityLineofCredit (HELOC)

Investors-family/friends

Investors- other

Dealsunder 500K 83.7% 5.8% 4.8% 4.8% 1.0%

47

II-II BusinessTransactionsValuedfrom$500,000to$999,999

48

TimetoClose


0%

5%

10%

15%

20%

25%

30%

35%

40%

45%

50%

1month 2months 3months 4months 5months 6months 7months 8months 9months 10months 1.1- 1.5years

1.6- 2years

Dealsfrom500Kto1M 3% 11% 16% 11% 18% 13% 8% 3% 3% 3% 5% 8%

49

Industry


0%

5%

10%

15%

20%

25%

30%

35%

40%

45%

50%

Businessservices

Services-personal


Healthcare&biotech

Construction&engineering

Consumergoods&Retail

Manufact. Restaurants Services-financial


Other

Dealsfrom500Kto1M 16% 13% 13% 11% 8% 5% 5% 5% 5% 5% 13%

50

SDEMultiplePaid


0%

5%

10%

15%

20%

25%

30%

35%

40%

45%

50%

0.25 1 1.75 2 2.25 2.5 2.75 3 3.25 3.5Dealsfrom500Kto1M 3% 3% 3% 7% 23% 10% 17% 27% 3% 3%

51

EBITDAMultiplePaid


0%

5%

10%

15%

20%

25%

30%

35%

40%

45%

50%

2.75 3 4 4.25 5.5 6 6.25Dealsfrom500Kto1M 25% 13% 13% 13% 13% 13% 13%

52

MultipleType


0.0%

10.0%

20.0%

30.0%

40.0%

50.0%

60.0%

70.0%

80.0%

90.0%

100.0%


SDEnotincludingworkingcapital



TTMEBITDAnotincluding working

capitalDealsfrom500Kto1M 13.2% 65.8% 15.8% 2.6% 2.6%

53

BuyerType:Deals$500,000- $999,999


44.7%

26.3%

23.7%

3% 3%

1sttimeindividual



PEfirm- Platform

PEfirm- Add-on

54



0%

5%

10%

15%

20%

25%

30%

35%

40%

45%

50%

Retirement Burnt out Newopportunity

Familyissues Relocation/moving

Potential taxesincreases

Other

Dealsfrom500Kto1M 39% 21% 11% 8% 8% 3% 11%

55



0%

5%

10%

15%

20%

25%

30%

35%

40%

45%

50%

within 20miles within 50miles within 100miles morethan100milesDealsfrom500Kto1M 53% 16% 13% 18%

56



0%

5%

10%

15%

20%

25%

30%

35%

40%

45%

50%

within state within city within country international buyerDealsfrom500Kto1M 42% 26% 29% 3%

57



0%

5%

10%

15%

20%

25%

30%

35%

40%

45%

50%



Dealsfrom500Kto1M 42% 29% 11% 11% 8%

58

FinancingStructure


0%

10%

20%

30%

40%

50%

60%

70%

80%

90%

100%

Buyersequity Seniordebt Sellerfinancing Earnout OtherDealsfrom500Kto1M 37% 37% 23% 1% 2%

59



0.0%

10.0%

20.0%

30.0%

40.0%

50.0%

60.0%

70.0%

80.0%

90.0%

100.0%



Investors- other

Dealsfrom500Kto1M 66.7% 7.7% 5.1% 15.4% 5.1%

60

II-III BusinessTransactionsValuedfrom$1Millionto$1.99Million

61

TimetoClose


0%

5%

10%

15%

20%

25%

30%

35%

40%

45%

50%

<1month 2months 4months 6months 7months 8months 9months 11months 12months 1.1- 1.5years

>2years

Dealsfrom1Mto2M 5% 10% 15% 25% 5% 10% 5% 5% 5% 10% 5%

62

Industry


0%

5%

10%

15%

20%

25%

30%

35%

40%

45%

50%

Consumergoods& Retail


Manufacturing Businessservices


Services-personal


Healthcare&biotech

Services-financial

Other

Dealsfrom1Mto2M 25% 10% 10% 10% 10% 10% 10% 5% 5% 5%

63

SDEMultiplePaid


0%

5%

10%

15%

20%

25%

30%

35%

40%

45%

50%

1.5 2.5 2.75 3 3.25 3.5 3.75 4 8Dealsfrom1Mto2M 8% 25% 8% 8% 8% 17% 8% 8% 8%

64

EBITDAMultiplePaid


0%

5%

10%

15%

20%

25%

30%

35%

40%

45%

50%

1.25 3 3.25 3.5 3.75 4 5Dealsfrom1Mto2M 13% 13% 13% 25% 13% 13% 13%

65

MultipleType


0.0%

10.0%

20.0%

30.0%

40.0%

50.0%

60.0%

70.0%

80.0%

90.0%

100.0%



EBITDAincludingworkingcapital



Dealsfrom1Mto2M 5.0% 55.0% 20.0% 15.0% 5%

66

BuyerType:Deals$1Million- $1.99Million


40%

20%

30%

5% 5%

1sttimeindividual



PEfirm- Platform

PEfirm- Add-on

67



0%

10%

20%

30%

40%

50%

60%

70%

80%

90%

100%

Retirement Newopportunity Burnt out Potential taxesincreases

Other

Dealsfrom1Mto2M 65% 15% 5% 5% 10%

68



0%

5%

10%

15%

20%

25%

30%

35%

40%

45%

50%

within 20miles within 50miles within 100miles morethan100milesDealsfrom1Mto2M 30% 20% 20% 30%

69



0%

5%

10%

15%

20%

25%

30%

35%

40%

45%

50%

within city within state within country international buyerDealsfrom1Mto2M 15% 55% 20% 10%

70



0%

5%

10%

15%

20%

25%

30%

35%

40%

45%

50%



Dealsfrom1Mto2M 30% 25% 20% 10% 15%

71

FinancingStructure


0%

10%

20%

30%

40%

50%

60%

70%

80%

90%

100%

Seniordebt Buyersequity Sellerfinancing Sellerretained equity EarnoutDealsfrom1Mto2M 49% 23% 12% 4% 3%

72



0.0%

10.0%

20.0%

30.0%

40.0%

50.0%

60.0%

70.0%

80.0%

90.0%

100.0%



Crowdfunding

Dealsfrom1Mto2M 69.6% 17.4% 4.3% 4.3% 4.3%

73

II-IV BusinessTransactionsValuedfrom$2Millionto$4.99Million

74

TimetoClose


0%

5%

10%

15%

20%

25%

30%

35%

40%

45%

50%

1month 3months 4months 5months 6months 7months 8months 9months 11months 12months 1.6- 2yearsDealsfrom2Mto5M 7% 7% 7% 7% 14% 7% 7% 7% 7% 14% 14%

75

Industry


0%

5%

10%

15%

20%

25%

30%

35%

40%

45%

50%

Manufacturing Wholesale&distribution



Consumer goods&Retail

Other

Dealsfrom2Mto5M 29% 14% 14% 14% 7% 21%

76

SDEMultiplePaid


0%

5%

10%

15%

20%

25%

30%

35%

40%

45%

50%

2 3.5 4 7.5 8Dealsfrom2Mto5M 14% 29% 29% 14% 14%

77

EBITDAMultiplePaid


0%

5%

10%

15%

20%

25%

30%

35%

40%

45%

50%

3 4 4.25 6 >8Dealsfrom2Mto5M 14% 29% 29% 14% 14%

78

MultipleType


0.0%

10.0%

20.0%

30.0%

40.0%

50.0%

60.0%

70.0%

80.0%

90.0%

100.0%

SDEincludingworkingcapital



EBITDAnotincluding working

capital

TTMEBITDAincluding working

capital


capitalDealsfrom2Mto5M 7.1% 42.9% 21.4% 14.3% 7.1% 7.1%

79

BuyerType:Deals$2Million- $4.99Million


35.7%

21.4%

42.9%

1sttimeindividual



80



0%

5%

10%

15%

20%

25%

30%

35%

40%

45%

50%

Retirement Health Burnt out Newopportunity Familyissues OtherDealsfrom2Mto5M 50% 21% 7% 7% 7% 7%

81



0%

5%

10%

15%

20%

25%

30%

35%

40%

45%

50%


82



0%

5%

10%

15%

20%

25%

30%

35%

40%

45%

50%


83



0%

5%

10%

15%

20%

25%

30%

35%

40%

45%

50%

Horizontal add-on Buyingajob Better ROIthanotherinvestment


Dealsfrom2Mto5M 29% 29% 21% 14% 7%

84

FinancingStructure


0%

10%

20%

30%

40%

50%

60%

70%

80%

90%

100%

Seniordebt Buyersequity Sellerfinancing Sellerretained equity OtherDealsfrom2Mto5M 59% 18% 12% 2% 8%

85



0.0%

10.0%

20.0%

30.0%

40.0%

50.0%

60.0%

70.0%

80.0%

90.0%

100.0%



Investors- other

Dealsfrom2Mto5M 50.0% 8.3% 16.7% 16.7% 8.3%

86

II-V BusinessTransactionsValuedOver$5 Million

87

TimetoClose


0%

5%

10%

15%

20%

25%

30%

35%

40%

45%

50%

4months 5months 6months 9months 10months 11months 1.1- 1.5years 1.6- 2years >2yearsDealsfrom5Mto50M 20% 7% 7% 7% 7% 27% 7% 7% 13%

88

Industry


0%

5%

10%

15%

20%

25%

30%

35%

40%

45%

50%

Business services Healthcare&biotech Manufacturing Basicmaterials&energy Wholesale&distribution Information technologyDealsfrom5Mto50M 27% 20% 13% 13% 13% 13%

89

SDEMultiplePaid


0%

5%

10%

15%

20%

25%

30%

35%

40%

45%

50%

3.75 4 4.5Dealsfrom5Mto50M 33% 33% 33%

90

EBITDAMultiplePaid


0%

5%

10%

15%

20%

25%

30%

35%

40%

45%

50%

1.5 2.25 3 3.5 4 4.25 4.75 5 6 6.25Dealsfrom5Mto50M 8% 8% 8% 8% 8% 8% 8% 17% 17% 8%

91

MultipleType


0.0%

10.0%

20.0%

30.0%

40.0%

50.0%

60.0%

70.0%

80.0%

90.0%

100.0%






capitalDealsfrom5Mto50M 20.0% 40.0% 6.7% 13.3% 20.0%

92

BuyerType:Deals>$5Million


13.3%

20.0%

26.7%

40.0%



PEfirm- Platform

PEfirm- Add-on

93



0%

5%

10%

15%

20%

25%

30%

35%

40%

45%

50%

Retirement Acquisition Newopportunity

Familyissues Burnt out Unsolicitedoffer

Relocation/moving

Other

Dealsfrom5Mto50M 20% 20% 20% 13% 7% 7% 7% 7%

94



0%

5%

10%

15%

20%

25%

30%

35%

40%

45%

50%


95

BuyerLocation (Global)


0%

5%

10%

15%

20%

25%

30%

35%

40%

45%

50%


96



0%

5%

10%

15%

20%

25%

30%

35%

40%

45%

50%

Horizontal add-on Verticaladd-on Better ROIthanotherinvestment

Buyingajob Other

Dealsfrom5Mto50M 47% 20% 20% 7% 7%

97

FinancingStructure


0%

10%

20%

30%

40%

50%

60%

70%

80%

90%

100%

Buyersequity Seniordebt Sellerfinancing Mezzaninefinancing

Earnout Sellerretainedequity

Dealsfrom5Mto50M 43% 29% 15% 6% 5% 3%

98



0.0%10.0%20.0%30.0%40.0%50.0%60.0%70.0%80.0%90.0%100.0%

Cash Investors- otherDealsfrom5Mto50M 66.7% 33.3%

99

III. BusinessTransactionsTerminatedintheLast3Months

100

PercentageofBusinessTransactionsbySizeTerminatedWithoutClosingintheLast3

Months

TotalNumberofResponses=132

0%

20%

40%

60%

80%

100%



Dealsvaluedfrom$1million to$1.99

million

Dealsvaluedfrom$2million to$4.99

million

Dealsvaluedfrom$5million to$50

million

None

Wholesample 26% 10% 7% 10% 9% 39%

101

The Biggest Mistake Sellers Make That HurtTheir Chance of Successfully

Completing theDeal

0%10%20%30%40%50%60%70%80%90%100%

Unrealisticexpectations

Emotionaltiesto

business/can'tletgo

Decliningbusiness sales

Waitingtoolong/burntout

Nonresponsive/timelag

Poorfinancialrecords

Negativeattitude/ego

Other Nothing

Dealsvaluedunder$499,999 44% 4% 13% 8% 1% 25% 1% 3% 2%

Dealsvaluedfrom$500,000to$999,999 53% 6% 5% 12% 4% 17% 1% 2% 1%

Dealsvaluedfrom$1millionto$1.99million 58% 6% 11% 12% 1% 4% 3% 1% 4%

Dealsvaluedfrom$2millionto$4.99million 55% 5% 7% 10% 5% 7% 1% 0% 10%

Dealsvaluedfrom$5millionto$50million 60% 7% 9% 6% 3% 1% 1% 1% 10%

102

V. Expectations

103

Expectationsof Business Listings /Engagementsfrom New Clients intheNext3Months

Dealsize Greatlydecrease Decrease Staythe

same Increase Greatlyincrease

Score(1to5)

Dealsvaluedunder$499,999 0.0% 1.9% 29.6% 61.1% 7.4% 3.7

Dealsvaluedfrom$500,000to$999,999 0.0% 0.0% 28.9% 66.7% 4.4% 3.8

Dealsvaluedfrom$1million to$1.99million 0.0% 0.0% 36.8% 60.0% 3.2% 3.7


Dealsover$5million 0.0% 1.4% 38.0% 59.2% 1.4% 3.6

104

ExpectationsforBusinessValuationMultiples intheNext3Months

Dealsize Greatlydecrease Decrease Staythe

same Increase Greatlyincrease Score(1to5)

Dealsvaluedunder$499,999 0.9% 7.3% 81.8% 10.0% 0.0% 3.0

Dealsvaluedfrom$500,000to$999,999 0.0% 7.0% 78.9% 14.0% 0.0% 3.1



Dealsover$5million 0.0% 1.4% 70.4% 28.2% 0.0% 3.3

105

VI.AbouttheRespondents

106

DetailsAbouttheRespondentsGeographicLocation

01-23-56-78-1011-1516-20more than 20

CA#

OR#

WA#

MT# ND# MN#

ID#WY#

SD#

NV#UT#

AZ#

CO#

NM#

TX#

NE#

KS#

OK# AR#

LA#MS# AL#

FL#

GA#

TN#SC#

NC#

VA#WV#KY#MO#

IL#IA#

WI#MI#

IN#OH#

MD#

PA#NJ#

NY#

ME#

NH#VT#MA#RI#

CT#

HI#AK#

107

Totalnumberofresponses=508*Numberismorethannumberofrespondents asmanyrespondentsoverlapinto2or3areas

0%10%20%30%40%50%60%70%80%90%100%






Wholesample 48% 51% 43% 39% 32%

DetailsAbouttheRespondentsTypicalSizeofBusinessTransactions

108

DetailsAbouttheRespondentsMemberships/MultipleMemberships

56%

31%

10%

9%

5%

4%

4%

2%

2%

2%

2%

2%

2%

1%

1%

1%

1%

12%

14%

0% 10% 20% 30% 40% 50% 60%

IBBA

M&ASource

Business BrokersofFlorida

CaliforniaAssociationofBusiness Brokers

ColoradoAssociationof Business Intermediaries

NewEnglandBusinessBrokersAssociation

TexasAssociationofBusiness Brokers

ArizonaBusinessBrokersAssociation

Carolina- VirginiaBusinessBrokersAssociation

FloridaBusinessBrokersAssociation

MichiganBusinessBrokersAssociation

MidwestBusinessBrokersIntermediaries

PennsylvaniaBusinessBrokersAssociation

Mid-AtlanticBusinessIntermediariesAssociation,Inc.

NevadaBusinessBrokersAssociation

OhioBusiness BrokersAssociation

NewYorkAssociationofBusinessBrokers

Other

None

109

DetailsAbouttheRespondentsWorkingExperience

6% 4%6%

3%3%4%4%

6%5%

4%5%19%

13%

17%

Lessthan1year

1year

2years

3years

4years

5years

6years

7years

8years

9years

10years

11-15years

16-20years

>20years

110

DetailsAbouttheRespondentsProfessionalCredentials

0%

10%

20%

30%

40%

50%

60%

70%

80%

90%

100%

CBI MBA M&AMI CBB CPA CMEA ABI BCB BCI CFA CMSBB CM&AA AM&AA Other None% 40% 24% 10% 9% 7% 6% 2% 2% 2% 1% 1% 1% 1% 23% 26%

111

DetailsAbouttheRespondentsProfessionalCredentials

0%

10%

20%

30%

40%

50%

60%

70%

80%

90%

100%

CBI MBA M&AMI CBB CPA CMEA ABI BCB BCI CFA CMSBB CM&AA AM&AA Other None% 40% 24% 10% 9% 7% 6% 2% 2% 2% 1% 1% 1% 1% 23% 26%

112

DetailsAbouttheRespondents

0%10%20%30%40%50%60%70%80%90%100%

FINRAlicensed RespondentswhoplantobeFINRAlicensedinthenext12months

RespondentsrelyingontheFINRAlettertolegallyprotect

them

RespondentswhobelievethatH.R.2274willpassin

thenext12months

Respondentswhoconsider

themselvestobemoreMainStreet(<2MM)than

M&A

7% 7%

41%

70%61%

113

THANK YOU!

Scott Bushkie, CBI, M&AMI, IBBA Marketing [email protected]

Lisa Riley, Ph.D., IBBA Marketing [email protected]

Craig Everett, Ph.D., MBA Assistant Professor of Finance

Director, Pepperdine Private Capital Markets Projecthttp://bschool.pepperdine.edu/privatecapital

[email protected]

market pulse report first quarter 2014 · market pulse report first quarter 2014 scott bushkie,...

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