Business Brokers Say Fear of a Recession is Driving Down Small Business Valuations

December 4, 2019

Q3 2019 Market Pulse Report published by the International Business Brokers Association (IBBA), M&A Source and the Pepperdine Private Capital Market Project. “The market doesn’t like uncertainty particularly on Main Street,” said Tom Caltrider, Managing Director of Hawaii Business Sales, member of IBBA/M&A Source. “Small business owners are worried that a recession is coming, and trade issues are causing volatility. All that nervous energy means buyers are dialing back a bit – particularly on smaller market deals.” Uncertainty over the upcoming presidential election is less impactful than a looming recession with 20% of business advisors saying the election next year is impacting the M&A market. The trade wars with China are having a smaller impact on small businesses with 11% of advisors saying they will impact the Main Street M&A market and 27% saying they will impact the overall market. Even though small business owners continue to provide seller financing as part of the purchase price (approximately 10% to 15%) they generally are receiving more cash at close than a year ago. The biggest jump was for businesses valued between $1 million and $2 million as 93% of the purchase price was realized at the close of the sale in Q3 2019 compared to 80% of the purchase price in Q3 2018. “Lenders always like to see sellers keep some skin in the game,” Tom Caltrider added. “When sellers aren’t willing to finance any of the purchase price that sends warning signals to buyers and lenders alike. Refusing to provide seller financing is like holding up a giant ‘no confidence’ sign and it’s likely to scare other parties away from the deal.” About the Market Pulse Report The Market Pulse Report compares conditions for businesses being sold on Main Street (values of up to $2 million) to those being sold on the Lower Middle Market (values of $2 million to $50 million). The Q3 2019 survey was conducted October 1-15, 2019 and was completed by 236 business brokers and M&A advisors. About International Business Brokers Association (IBBA) and the M&A Source Founded in 1983, IBBA is the largest non-profit association specifically formed to meet the needs of people and firms engaged in various aspects of business brokerage and mergers and acquisitions. The IBBA is a trade association of business brokers providing education, conferences, professional designations and networking opportunities. For more information about IBBA, visit the website at www.ibba.org or follow the IBBA on Facebook, Twitter and LinkedIn. Founded in 1991, the M&A Source promotes professional development of merger and acquisition professionals so that they may better serve their clients’ needs and maximize public awareness of professional intermediary services available for middle market merger and acquisition transactions. For more information about the M&A Source visit www.masource.org, or follow the M&A Source on Facebook – The recession isn’t here yet, but business advisors say a looming slowdown is already driving down business valuations. Over half (53%) of business brokers surveyed say a recession is the biggest concern especially for small businesses according to the Q3 2019 Market Pulse Report published by the International Business Brokers Association (IBBA), M&A Source and the Pepperdine Private Capital Market Project. “The market doesn’t like uncertainty particularly on Main Street,” said Tom Caltrider, Managing Director of Hawaii Business Sales, member of IBBA/M&A Source. “Small business owners are worried that a recession is coming, and trade issues are causing volatility. All that nervous energy means buyers are dialing back a bit – particularly on smaller market deals.” Uncertainty over the upcoming presidential election is less impactful than a looming recession with 20% of business advisors saying the election next year is impacting the M&A market. The trade wars with China are having a smaller impact on small businesses with 11% of advisors saying they will impact the Main Street M&A market and 27% saying they will impact the overall market. Even though small business owners continue to provide seller financing as part of the purchase price (approximately 10% to 15%) they generally are receiving more cash at close than a year ago. The biggest jump was for businesses valued between $1 million and $2 million as 93% of the purchase price was realized at the close of the sale in Q3 2019 compared to 80% of the purchase price in Q3 2018. “Lenders always like to see sellers keep some skin in the game,” Tom Caltrider added. “When sellers aren’t willing to finance any of the purchase price that sends warning signals to buyers and lenders alike. Refusing to provide seller financing is like holding up a giant ‘no confidence’ sign and it’s likely to scare other parties away from the deal.” About the Market Pulse Report The Market Pulse Report compares conditions for businesses being sold on Main Street (values of up to $2 million) to those being sold on the Lower Middle Market (values of $2 million to $50 million). The Q3 2019 survey was conducted October 1-15, 2019 and was completed by 236 business brokers and M&A advisors. About International Business Brokers Association (IBBA) and the M&A Source Founded in 1983, IBBA is the largest non-profit association specifically formed to meet the needs of people and firms engaged in various aspects of business brokerage and mergers and acquisitions. The IBBA is a trade association of business brokers providing education, conferences, professional designations and networking opportunities. For more information about IBBA, visit the website at www.ibba.org or follow the IBBA on Facebook, Twitter and LinkedIn. Founded in 1991, the M&A Source promotes professional development of merger and acquisition professionals so that they may better serve their clients’ needs and maximize public awareness of professional intermediary services available for middle market merger and acquisition transactions. For more information about the M&A Source visit www.masource.org, or follow the M&A Source on Facebook Honolulu, Hawaii, November 12, 2019 – The recession isn’t here yet, but business advisors say a looming slowdown is already driving down business valuations. Over half (53%) of business brokers surveyed say a recession is the biggest concern especially for small businesses according to the Q3 2019 Market Pulse Report published by the International Business Brokers Association (IBBA), M&A Source and the Pepperdine Private Capital Market Project. “The market doesn’t like uncertainty particularly on Main Street,” said Tom Caltrider, Managing Director of Hawaii Business Sales, member of IBBA/M&A Source. “Small business owners are worried that a recession is coming, and trade issues are causing volatility. All that nervous energy means buyers are dialing back a bit – particularly on smaller market deals.” Uncertainty over the upcoming presidential election is less impactful than a looming recession with 20% of business advisors saying the election next year is impacting the M&A market. The trade wars with China are having a smaller impact on small businesses with 11% of advisors saying they will impact the Main Street M&A market and 27% saying they will impact the overall market. Even though small business owners continue to provide seller financing as part of the purchase price (approximately 10% to 15%) they generally are receiving more cash at close than a year ago. The biggest jump was for businesses valued between $1 million and $2 million as 93% of the purchase price was realized at the close of the sale in Q3 2019 compared to 80% of the purchase price in Q3 2018. “Lenders always like to see sellers keep some skin in the game,” Tom Caltrider added. “When sellers aren’t willing to finance any of the purchase price that sends warning signals to buyers and lenders alike. Refusing to provide seller financing is like holding up a giant ‘no confidence’ sign and it’s likely to scare other parties away from the deal.” About the Market Pulse Report The Market Pulse Report compares conditions for businesses being sold on Main Street (values of up to $2 million) to those being sold on the Lower Middle Market (values of $2 million to $50 million). The Q3 2019 survey was conducted October 1-15, 2019 and was completed by 236 business brokers and M&A advisors. About International Business Brokers Association (IBBA) and the M&A Source Founded in 1983, IBBA is the largest non-profit association specifically formed to meet the needs of people and firms engaged in various aspects of business brokerage and mergers and acquisitions. The IBBA is a trade association of business brokers providing education, conferences, professional designations and networking opportunities. For more information about IBBA, visit the website at www.ibba.org or follow the IBBA on Facebook, Twitter and LinkedIn. Founded in 1991, the M&A Source promotes professional development of merger and acquisition professionals so that they may better serve their clients’ needs and maximize public awareness of professional intermediary services available for middle market merger and acquisition transactions. For more information about the M&A Source visit www.masource.org, or follow the M&A Source on Facebook, LinkedIn and Twitter. About Pepperdine University Graziadio Business School For more than 50 years, the Pepperdine Graziadio Business School has challenged individuals to think boldly and drive meaningful change within their industries and communities. Dedicated to developing Bestfor the World Leaders, the Graziadio School offers a comprehensive range of MBA, MS, executive, and doctoral degree programs grounded in integrity, innovation, and entrepreneurship. The Graziadio School advances experiential learning through small classes with distinguished faculty that stimulate critical thinking and meaningful connection, inspiring students and working professionals to realize their greatest potential as values-centered leaders. Follow Pepperdine Graziadio on Facebook, Twitter, Instagram, and LinkedIn. About Hawaii Business Sales Hawaii Business Sales (“HBS”) is Hawaii's premier business broker. HBS helps Hawaii business owners sell and business buyers buy Hawaii businesses. HBS’s professional team of intermediaries work with all types and sizes of businesses all over the State of Hawaii. HBS represents either business sellers or buyers and in addition to business sale transactions HBS offers business valuation and business owner exit planning services. Contact: Tom Caltrider Managing Director Member IBBA / M&A Source 808-283-2067 HawaiiBusinessSales@gmail.com www.HawaiiBizforSale.com and Twitter. About Pepperdine University Graziadio Business School For more than 50 years, the Pepperdine Graziadio Business School has challenged individuals to think boldly and drive meaningful change within their industries and communities. Dedicated to developing Best for the World Leaders, the Graziadio School offers a comprehensive range of MBA, MS, executive, and doctoral degree programs grounded in integrity, innovation, and entrepreneurship. The Graziadio School advances experiential learning through small classes with distinguished faculty that stimulate critical thinking and meaningful connection, inspiring students and working professionals to realize their greatest potential as values-centered leaders. Follow Pepperdine Graziadio on Facebook, Twitter, Instagram, and LinkedIn. About Hawaii Business Sales Hawaii Business Sales (“HBS”) is Hawaii's premier business broker. HBS helps Hawaii business owners sell and business buyers buy Hawaii businesses. HBS’s professional team of intermediaries work with all types and sizes of businesses all over the State of Hawaii. HBS represents either business sellers or buyers and in addition to business sale transactions HBS offers business valuation and business owner exit planning services. Contact: Tom Caltrider Managing Director Member IBBA / M&A Source 808-283-2067 HawaiiBusinessSales@gmail.com www.HawaiiBizforSale.com and Twitter. About Pepperdine University Graziadio Business School For more than 50 years, the Pepperdine Graziadio Business School has challenged individuals to think boldly and drive meaningful change within their industries and communities. Dedicated to developing Best for the World Leaders, the Graziadio School offers a comprehensive range of MBA, MS, executive, and doctoral degree programs grounded in integrity, innovation, and entrepreneurship. The Graziadio School advances experiential learning through small classes with distinguished faculty that stimulate critical thinking and meaningful connection, inspiring students and working professionals to realize their greatest potential as values-centered leaders. Follow Pepperdine Graziadio on Facebook, Twitter, Instagram, and LinkedIn. About Hawaii Business Sales Hawaii Business Sales (“HBS”) is Hawaii's premier business broker. HBS helps Hawaii business owners sell and business buyers buy Hawaii businesses. HBS’s professional team of intermediaries work with all types and sizes of businesses all over the State of Hawaii. HBS represents either business sellers or buyers and in addition to business sale transactions HBS offers business valuation and business owner exit planning services. Contact: Tom Caltrider Managing Director Member IBBA / M&A Source 808-283-2067 HawaiiBusinessSales@gmail.com www.HawaiiBizforSale.com – The recession isn’t here yet, but business advisors say a looming slowdown is already driving down business valuations. Over half (53%) of business brokers surveyed say a recession is the biggest concern especially for small businesses according to the Q3 2019 Market Pulse Report published by the International Business Brokers Association (IBBA), M&A Source and the Pepperdine Private Capital Market Project. “The market doesn’t like uncertainty particularly on Main Street,” said Tom Caltrider, Managing Director of Hawaii Business Sales, member of IBBA/M&A Source. “Small business owners are worried that a recession is coming, and trade issues are causing volatility. All that nervous energy means buyers are dialing back a bit – particularly on smaller market deals.” Uncertainty over the upcoming presidential election is less impactful than a looming recession with 20% of business advisors saying the election next year is impacting the M&A market. The trade wars with China are having a smaller impact on small businesses with 11% of advisors saying they will impact the Main Street M&A market and 27% saying they will impact the overall market. Even though small business owners continue to provide seller financing as part of the purchase price (approximately 10% to 15%) they generally are receiving more cash at close than a year ago. The biggest jump was for businesses valued between $1 million and $2 million as 93% of the purchase price was realized at the close of the sale in Q3 2019 compared to 80% of the purchase price in Q3 2018. “Lenders always like to see sellers keep some skin in the game,” Tom Caltrider added. “When sellers aren’t willing to finance any of the purchase price that sends warning signals to buyers and lenders alike. Refusing to provide seller financing is like holding up a giant ‘no confidence’ sign and it’s likely to scare other parties away from the deal.” About the Market Pulse Report The Market Pulse Report compares conditions for businesses being sold on Main Street (values of up to $2 million) to those being sold on the Lower Middle Market (values of $2 million to $50 million). The Q3 2019 survey was conducted October 1-15, 2019 and was completed by 236 business brokers and M&A advisors. About International Business Brokers Association (IBBA) and the M&A Source Founded in 1983, IBBA is the largest non-profit association specifically formed to meet the needs of people and firms engaged in various aspects of business brokerage and mergers and acquisitions. The IBBA is a trade association of business brokers providing education, conferences, professional designations and networking opportunities. For more information about IBBA, visit the website at www.ibba.org or follow the IBBA on Facebook, Twitter and LinkedIn. Founded in 1991, the M&A Source promotes professional development of merger and acquisition professionals so that they may better serve their clients’ needs and maximize public awareness of professional intermediary services available for middle market merger and acquisition transactions. For more information about the M&A Source visit www.masource.org, or follow the M&A Source on Facebook ,LinkedIn and Twitter. About Pepperdine University Graziadio Business School For more than 50 years, the Pepperdine Graziadio Business School has challenged individuals to think boldly and drive meaningful change within their industries and communities. Dedicated to developing Best for the World Leaders, the Graziadio School offers a comprehensive range of MBA, MS, executive, and doctoral degree programs grounded in integrity, innovation, and entrepreneurship. The Graziadio School advances experiential learning through small classes with distinguished faculty that stimulate critical thinking and meaningful connection, inspiring students and working professionals to realize their greatest potential as values-centered leaders. Follow Pepperdine Graziadio on Facebook, Twitter, Instagram, and LinkedIn. About Hawaii Business Sales Hawaii Business Sales (“HBS”) is Hawaii's premier business broker. HBS helps Hawaii business owners sell and business buyers buy Hawaii businesses. HBS’s professional team of intermediaries work with all types and sizes of businesses all over the State of Hawaii. HBS represents either business sellers or buyers and in addition to business sale transactions HBS offers business valuation and business owner exit planning services. Contact: Tom Caltrider Managing Director Member IBBA / M&A Source 808-283-2067 HawaiiBusinessSales@gmail.com www.HawaiiBizforSale.com