Every quarter the International Business Brokers Association (IBBA) releases their report on the previous quarter and highlights key trends expected in upcoming quarters. We've pulled out some of the highlights from the report which we believe to be pertinent to business owners who are considering selling their business in 2025.
Market Overview: Signs of Optimism for 2025
Higher Interest Rates and an election year made 2024 a turbulent year for many business owners starting the exit process. Buyers were cautious and many were slow to submit Letters of Intent (LOI) and Offers. However, after the election we began to see a subtle thawing in terms of business listing activity.
Q4 2024 showed positive momentum in deal-making activity, with several encouraging indicators:
More offers per deal across all market segments
Higher cash-at-close percentages
Valuations were more stable and even saw some improvement
Growing market confidence, especially in the lower middle market
Key Statistics Business Owners Should Know
Valuation Insights
Sellers are receiving valuations at 95% or better of their benchmark values.
Lower middle market businesses ($5M-$50M) are achieving multiples of 6.0x EBITDA.
Sellers are receiving an average of 84% cash at closing.
Seller financing typically accounts for 15% or less of deal structure.
Deal Competition
Main Street businesses ($0-2M) receive an average of 2.5 offers per deal.
Lower middle market businesses receive an average of 4.5 offers per deal.
Businesses valued at $5M+ saw 40% of deals attract 3 or more offers.
21% of larger deals received 10 or more offers.
Critical Insights for Exit Planning
Perhaps the most striking finding from the report relates to exit planning. Despite retirement being the #1 reason for sale in 2024, most business owners are not engaging in proactive exit planning:
The majority of Main Street business owners conduct no exit planning.
Even in the $5M-$50M segment, business owners spent no more than two years planning their exit.
Most sellers who do plan are going to market within one year of initial consultation.
Industry Trends
The economy has a critical impact on the size and types of businesses that are selling. The most active sectors for transactions in 2024 were:
1. Restaurants
2. Personal services
3. Consumer goods/retail
4. Business services
5. Construction/engineering
6. Manufacturing (particularly in the lower middle market)
Looking Ahead: 2025 Market Factors
According to the IBBA, several factors are expected to influence the M&A market in 2025:
Anticipated Interest Rate reductions
More stable political environment post-election
Improving lending conditions
Strong buyer demand, particularly from strategic acquirers
What This Means for Business Owners — Our Take
We believe the market will improve as compared to 2024, but there still remains potential headwinds given the economy — Interest Rates still pose a challenge. We still see lower-middle market businesses generating the most demand while smaller Main Street Businesses are likely to be more difficult to sell.
The data clearly shows that while the market remains active, proper planning and timing are crucial for a successful exit. Business owners considering a sale should begin their exit planning well in advance to maximize their company's value and ensure a smooth transaction process.
For more information about selling your business or to receive a confidential business valuation, contact us today.
To your success,
Jason Huett CEO | CMO | Business Broker
Collaborative Commercial Business Brokers, LLC.
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Source: IBBA and M&A Source Market Pulse Report, Q4 2024
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