Market Pulse Report Q2, 2016 vsQ2, 2015 - Rogerson Business Services · 2019-05-11 · Market Pulse...

Market Pulse ReportQ2, 2016 vs Q2, 2015

Scott Bushkie, CBI, M&AMI, IBBA Chair

Lisa Riley, Ph.D., CBI, IBBA Market Pulse Chair

Craig Everett, Ph.D.Director, Pepperdine Private Capital Markets Project

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

Source.

ACKNOWLEDGEMENTS

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

David M. Smith, Ph.D.Interim Dean

John K. Paglia, Ph.D.Associate Dean, Associate Professor of Finance

Cynthia ChiltonDirector of Marketing

Irina ShaykhutdinovaResearch Associate

I. About the Market Pulse Report……….……….…………........5II. Business Transactions Closed in the Last 3 Months…..….…7III. Business Expectations…………………………………...……71

Outline

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. About the Market Pulse Report

• 25 questions

• Invited participants were members of theInternational Business Brokers Association (IBBA),IBBA Affiliates/Chapters, and/or M&A Source

• 378 completed responses in Q2, 2016; 249 completed responses in Q2, 2015

• Responses collected from July 1 – July 15, 2016and from July 1 – July 15, 2015 accordingly

About the Survey

II. Business Transactions Closed in the Last 3 Months

Typical Size of Business Transactions

Deals valued under$499,999

Deals valued from$500,000 to $999,999

Deals valued from $1million to $1.99 million

Deals valued from $5million to $50 million

Q2, 2016 57% 46% 40% 33% 23%Q2, 2015 50% 44% 43% 33% 34%

Number of Business Transactions Closed by Respondents in the Last 3 Months

1 2 3 4 5 6 7 8 NoneQ2, 2016 26% 15% 7% 2% 2% 1% 1% 1% 46%Q2, 2015 34% 13% 4% 2% 1% 1% 0% 0% 51%

Business Transactions Closed in the Last 3 Months by Deal Size

Q2, 2016 51% 17% 15% 11% 6%Q2, 2015 47% 17% 15% 10% 11%

Change in the Number of New Clients by Deal Size in The Last 3 Months

Deal size Greatly decreased Decreased Stayed the

same Increased Greatly increased Score (1 to 5)

Quarter Q2, 2016

Q2, 2015

Q2, 2016

Q2, 2015

Q2, 2016

Q2, 2015

Q2, 2016

Q2, 2015

Q2, 2016

Q2, 2015

Q2, 2016

Q2, 2015

Deals valued under $499,999 3% 4% 9% 10% 50% 45% 34% 38% 4% 3% 3.5 3.3

Deals valued from $500,000 to $999,999 4% 1% 8% 9% 52% 41% 34% 45% 2% 4% 3.7 3.4

Deals valued from $1 million to $1.99 million 6% 3% 10% 13% 52% 43% 32% 38% 1% 4% 3.6 3.3

Deals valued from $2 million to $4.99 million 6% 5% 11% 9% 50% 48% 27% 33% 6% 5% 3.7 3.2

Deals valued from $5 million to$50 million 6% 4% 8% 10% 48% 45% 31% 37% 7% 4% 3.9 3.3

Was it Buyer’s Market in the last 3 months?

Q2, 2016 62% 54% 40% 28% 22%Q2, 2015 62% 56% 42% 37% 22%

Median Time to Close a Deal (Months)

0123456789

101112

< 500K 500K ‐ 1M 1M ‐ 2M 2M ‐ 5M 5M ‐ 50MQ2, 2016 6 6 9 9 9Q2, 2015 5 6 8 9 8

Median SDE Multiple Paid

< 500K 500K ‐ 1M 1M ‐ 2M 2M ‐ 5M 5M ‐ 50MQ2, 2016 2.3 2.8 3.3 3.0 6.8Q2, 2015 2.0 2.5 3.0 3.3 4.5

2.32.8

3.33.0

2.0 2.53.0 3.3

Median EBITDA Multiple Paid

< 500K 500K ‐ 1M 1M ‐ 2M 2M ‐ 5M 5M ‐ 50MQ2, 2016 2.5 3.0 3.9 4.0 5.1Q2, 2015 2.5 3.0 3.5 4.0 5.0

2.53.0

3.9 4.0

2.5 3.03.5

4.05.0

Business Transactions Valuedunder $499,999

Time to Close

< 1month

1 month 2months

3months

4months

5months

6months

7months

8months

9months

10months

11months

12months

1.1 ‐ 1.5years

1.6 ‐ 2years

> 2years

Q2, 2016 3% 1% 8% 14% 10% 7% 13% 8% 5% 6% 3% 5% 6% 9% 0% 0%

Q2, 2015 1% 5% 19% 17% 4% 7% 14% 4% 4% 4% 5% 1% 7% 6% 1% 1%

Industry

Basicmaterials &energy

Businessservices

Construction& engineering

Consumergoods &Retail

Informationtechnology

Health care &biotech

Manufacturing

Restaurants Services ‐financial

Services ‐personal

Wholesale &distribution

Q2, 2016 3% 12% 6% 13% 0% 4% 4% 25% 2% 19% 2% 9%

Q2, 2015 0% 13% 2% 11% 2% 9% 3% 24% 0% 19% 7% 11%

SDE Multiple Paid

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 3.75 4 4.5 4.75 5 5.5 6.75 7.5 8.25 8.5 >10Q2, 2016 4% 2% 1% 5% 9% 6% 9% 13% 14% 7% 11% 6% 4% 2% 1% 1% 1% 1% 1% 1% 1% 1% 0% 1% 1%Q2, 2015 0% 1% 1% 9% 6% 4% 8% 24% 18% 8% 7% 8% 1% 0% 1% 2% 0% 0% 1% 0% 0% 0% 2% 0% 0%

EBITDA Multiple Paid

0.25 1 1.25 1.5 1.75 2 2.25 2.5 2.75 3 3.25 3.75 4 5 5.25 8 8.5Q2, 2016 10% 14% 0% 0% 5% 5% 10% 19% 5% 10% 5% 0% 0% 5% 5% 5% 5%Q2, 2015 0% 0% 13% 13% 13% 13% 0% 0% 0% 25% 0% 13% 13% 0% 0% 0% 0%

Multiple Type

SDE not includingworking capital

SDE includingworking capital

EBITDA includingworking capital

EBITDA not includingworking capital

TTM EBITDAincluding working

capital

TTM EBITDA notincluding working

capitalQ2, 2016 19% 71% 2% 5% 1% 2%Q2, 2015 22% 70% 2% 5% 1% 0%

Buyer Type

1st time individual individual whoowned a business

existingcompany/strategic

PE firm ‐ Platform PE firm ‐ Add‐on Other

Q2, 2016 42% 40% 12% 1% 1% 4%Q2, 2015 57% 23% 19% 0% 0% 1%

#1 Reason for Seller to Go to Market

Recapitalization Burnt out Family issues Health Newopportunity

Relocation/moving

Retirement Unsolicitedoffer

Q2, 2016 2% 17% 9% 8% 18% 9% 27% 2% 6%

Q2, 2015 1% 21% 6% 6% 14% 7% 39% 0% 7%

Buyer Location

within 20 miles within 50 miles within 100 miles more than 100 milesQ2, 2016 67% 14% 3% 16%Q2, 2015 54% 15% 9% 21%

#1 Motivation for Buyer

Buying a job Better ROI than otherinvestment

Vertical add‐on Horizontal add‐on Other

Q2, 2016 51% 11% 9% 16% 13%Q2, 2015 53% 10% 8% 18% 10%

Financing Structure

Buyer's equity Senior debt Seller financing Earn out Seller retained equity OtherQ2, 2016 59% 21% 15% 2% 1% 2%Q2, 2015 62% 22% 12% 1% 0% 2%

Business Transactions Valuedfrom $500,000 to $999,999

Time to Close

1 month 2months

3months

4months

5months

6months

7months

8months

9months

10months

11months

12months

1.1 ‐ 1.5years

1.6 ‐ 2years

> 2 years

Q2, 2016 1% 6% 13% 8% 13% 13% 7% 4% 4% 6% 1% 7% 10% 4% 3%

Q2, 2015 0% 7% 12% 22% 7% 15% 10% 2% 0% 5% 0% 7% 5% 0% 7%

Industry

Basic materials& energy

Businessservices

Construction &engineering

Consumergoods & Retail

Manufacturing Restaurants Services ‐financial

Q2, 2016 1% 17% 10% 10% 1% 7% 6% 11% 1% 13% 10% 13%

Q2, 2015 5% 10% 10% 7% 0% 10% 2% 12% 0% 15% 15% 15%

SDE Multiple Paid

0.25 0.5 1.25 1.75 2 2.25 2.5 2.75 3 3.25 3.5 3.75 4 4.25 4.5 5 6 6.25Q2, 2016 2% 2% 5% 2% 13% 9% 11% 15% 16% 5% 7% 2% 0% 4% 2% 0% 2% 2%Q2, 2015 0% 0% 3% 13% 20% 7% 13% 7% 7% 7% 3% 3% 3% 0% 7% 7% 0% 0%

0.25 1 2 2.25 2.5 2.75 3 3.25 3.5 3.75 4 4.5 5 5.25Q2, 2016 19% 0% 13% 6% 6% 6% 0% 6% 6% 6% 13% 6% 6% 6%Q2, 2015 0% 18% 0% 18% 0% 9% 9% 9% 0% 18% 18% 0% 0% 0%

Multiple Type

capital

capitalQ2, 2016 23% 55% 7% 14% 1% 0%Q2, 2015 10% 63% 12% 12% 0% 2%

Buyer Type

Q2, 2016 30% 31% 27% 6% 4% 3%Q2, 2015 49% 28% 23% 0% 0% 0%

Relocation/moving

Q2, 2016 1% 20% 8% 6% 14% 4% 39% 3% 4%

Q2, 2015 5% 8% 15% 5% 13% 0% 51% 0% 3%

Buyer Location

Q2, 2016 34% 10% 25% 17% 14%Q2, 2015 54% 8% 13% 21% 5%

Financing Structure

Buyer's equity Senior debt Seller financing Earn out OtherQ2, 2016 42% 39% 16% 1% 2%Q2, 2015 40% 45% 11% 3% 0%

Business Transactions Valuedfrom $1 Million to $1.99 Million

Time to Close

2 months 3 months 4 months 5 months 6 months 7 months 8 months 9 months 10months

11months

12months

1.1 ‐ 1.5years

1.6 ‐ 2years

> 2 years

Q2, 2016 5% 5% 10% 0% 8% 8% 8% 12% 3% 2% 12% 17% 3% 7%

Q2, 2015 0% 17% 3% 11% 11% 6% 3% 6% 3% 3% 9% 14% 9% 6%

Industry

Businessservices

Q2, 2016 0% 5% 12% 5% 3% 7% 22% 3% 3% 15% 15% 10%

Q2, 2015 3% 17% 9% 14% 6% 6% 14% 3% 3% 6% 6% 14%

SDE Multiple Paid

0.5 1 1.25 2 2.25 2.5 2.75 3 3.25 3.5 3.75 4 4.25 5 5.75 6Q2, 2016 3% 3% 3% 5% 3% 5% 8% 18% 11% 16% 8% 3% 3% 11% 3% 0%Q2, 2015 0% 5% 0% 0% 0% 9% 14% 32% 18% 5% 0% 5% 0% 9% 0% 5%

1 1.25 1.5 2 2.5 2.75 3 3.25 3.5 3.75 4 4.25 4.5 5.25 6 7 8.25Q2, 2016 0% 0% 5% 5% 5% 9% 5% 5% 14% 5% 14% 9% 5% 9% 5% 9% 0%Q2, 2015 8% 8% 0% 8% 0% 8% 15% 0% 15% 8% 8% 8% 8% 0% 0% 0% 8%

Multiple Type

SDE including workingcapital

EBITDA including workingcapital

TTM EBITDA includingworking capital

Q2, 2016 23% 40% 15% 18% 3%Q2, 2015 34% 29% 9% 26% 3%

Buyer Type

Q2, 2016 33% 22% 30% 5% 8% 2%Q2, 2015 44% 34% 19% 0% 0% 3%

Recapitalization

Burnt out Family issues Health Newopportunity

Potentialtaxes

increases

Relocation/moving

Q2, 2016 3% 12% 5% 5% 2% 3% 7% 57% 2% 5%Q2, 2015 0% 9% 9% 6% 19% 0% 0% 56% 0% 0%

Buyer Location

Q2, 2016 22% 25% 17% 25% 12%Q2, 2015 38% 19% 13% 19% 13%

Financing Structure

Buyer's equity Senior debt Seller financing Earn out Seller retainedequity

Mezzaninefinancing

Q2, 2016 45% 39% 11% 2% 1% 1% 2%Q2, 2015 35% 50% 12% 3% 0% 0% 0%

Business Transactions Valuedfrom $2 Million to $4.99 Million

Time to Close

< 1month

1 month 2months

3months

4months

5months

6months

7months

8months

9months

10months

11months

12months

1.1 ‐ 1.5years

1.6 ‐ 2years

> 2years

Q2, 2016 4% 4% 0% 7% 4% 4% 13% 9% 4% 7% 7% 2% 4% 17% 4% 9%

Q2, 2015 0% 0% 4% 4% 16% 4% 16% 4% 0% 4% 8% 0% 8% 16% 0% 16%

Industry

Businessservices

Q2, 2016 4% 13% 11% 7% 0% 4% 26% 4% 7% 7% 11% 7%

Q2, 2015 8% 4% 24% 4% 4% 8% 24% 0% 0% 8% 16% 0%

SDE Multiple Paid

1 1.25 1.75 2 2.25 2.5 2.75 3 3.25 3.5 3.75 4 4.25 5.25 5.5 5.75 10Q2, 2016 4% 4% 4% 4% 4% 13% 4% 17% 4% 8% 8% 0% 8% 4% 8% 0% 4%Q2, 2015 0% 0% 10% 0% 0% 10% 10% 20% 0% 10% 20% 10% 0% 0% 0% 10% 0%

1 1.25 2 2.25 2.5 3 3.25 3.5 3.75 4 4.25 4.5 5 5.25 5.5 5.75 6 8 8.25 8.5 >10Q2, 2016 5% 9% 0% 5% 9% 5% 0% 5% 5% 23% 0% 5% 9% 5% 0% 5% 0% 0% 5% 5% 5%Q2, 2015 0% 0% 7% 7% 0% 0% 13% 13% 0% 13% 20% 7% 0% 0% 7% 0% 7% 7% 0% 0 0

Multiple Type

capital

capitalQ2, 2016 28% 24% 20% 17% 4% 7%Q2, 2015 12% 28% 32% 16% 8% 4%

Buyer Type

Q2, 2016 22% 17% 35% 4% 2% 20%Q2, 2015 20% 24% 36% 16% 4% 0%

Potential taxesincreases

Relocation/moving

Q2, 2016 7% 7% 9% 4% 13% 2% 0% 54% 4%

Q2, 2015 0% 20% 4% 4% 16% 0% 4% 52% 0%

Buyer Location

Q2, 2016 20% 13% 24% 17% 26%Q2, 2015 20% 24% 20% 24% 12%

Financing Structure

Buyer's equity Senior debt Seller financing Earn out Seller retained equity OtherQ2, 2016 45% 36% 10% 6% 1% 1%Q2, 2015 36% 33% 18% 12% 1% 0%

Business Transactions Valuedfrom $5 Million to $50 million

Time to Close

< 1month

1 month 2months

3months

4months

5months

6months

7months

9months

10months

11months

12months

1.1 ‐ 1.5years

1.6 ‐ 2years

> 2 years

Q2, 2016 9% 4% 4% 0% 4% 17% 4% 4% 4% 13% 0% 13% 4% 0% 17%

Q2, 2015 0% 0% 4% 8% 8% 8% 15% 8% 8% 12% 4% 4% 12% 8% 4%

Industry

Businessservices

Q2, 2016 4% 9% 0% 22% 9% 22% 9% 9% 4% 0% 13%

Q2, 2015 15% 4% 8% 8% 4% 35% 0% 8% 0% 15% 4%

SDE Multiple Paid

2 4 5 6.75 7Q2, 2016 33% 0% 0% 33% 33%Q2, 2015 0% 50% 50% 0% 0%

0.25 1 1.75 2.25 2.75 3 3.25 3.5 3.75 4 4.25 4.5 4.75 5 5.25 5.5 5.75 6 6.25 6.5 6.75 7.5 8 8.25 8.5Q2, 2016 5% 0% 5% 5% 10% 0% 5% 0% 0% 0% 5% 0% 5% 10% 10% 5% 15% 0% 0% 5% 0% 0% 10% 5% 0%Q2, 2015 0% 4% 0% 0% 0% 4% 0% 4% 4% 4% 4% 8% 13% 8% 0% 4% 0% 13% 8% 8% 4% 4% 0% 0% 4%

Multiple Type

capital

capitalQ2, 2016 4% 9% 43% 13% 13% 17%Q2, 2015 4% 4% 31% 42% 15% 4%

Buyer Type

Q2, 2016 13% 4% 30% 22% 17% 13%Q2, 2015 4% 0% 38% 38% 12% 8%

Relocation/moving

Q2, 2016 9% 17% 9% 4% 0% 9% 48% 4% 0%

Q2, 2015 27% 4% 4% 8% 8% 0% 31% 4% 15%

Buyer Location

Q2, 2016 9% 22% 22% 43% 4%Q2, 2015 8% 19% 15% 42% 15%

Financing Structure

Buyer's equity Senior debt Seller financing Earn out Seller retainedequity

Mezzaninefinancing

Q2, 2016 50% 26% 14% 5% 3% 1% 1%Q2, 2015 36% 41% 13% 4% 6% 0% 0%

III. Expectations

Expectations of Business Listings / Engagementsfrom New Clients in the Next 3 Months

Deal size Greatly decrease Decrease Stay the same Increase Greatly

increase Score (1 to 5)

Q2, 2016

Q2, 2015

Q2, 2016

Q2, 2015

Q2, 2016

Q2, 2015

Q2, 2016

Q2, 2015

Q2, 2016

Q2, 2015

Q2, 2016

Q2, 2015

Deals valued under $499,999 2.3% 0.0% 5.4% 5.1% 42.1% 33.8% 46.7% 56.6% 3.5% 4.4% 3.6 3.6

Deals valued from $500,000 to $999,999 2.8% 0.0% 4.2% 4.2% 41.9% 27.7% 47.4% 63.9% 3.7% 4.2% 3.6 3.7

Deals valued from $1 million to $1.99 million 3.1% 0.0% 4.1% 3.4% 43.8% 36.1% 44.8% 55.5% 4.1% 5.0% 3.5 3.6

Deals valued from $5 million to $50 million 3.2% 1.1% 6.3% 5.3% 50.0% 36.8% 36.5% 53.7% 4.0% 3.2% 3.3 3.5

Expectations for Business Valuation Multiples in the Next 3 Months

Deal size Greatly decrease Decrease Stay the same Increase Greatly

increase Score (1 to 5)

Q2, 2016

Q2, 2015

Q2, 2016

Q2, 2015

Q2, 2016

Q2, 2015

Q2, 2016

Q2, 2015

Q2, 2016

Q2, 2015

Q2, 2016

Q2, 2015

Deals valued under $499,999 1.6% 0.0% 6.2% 8.8% 81.0% 73.7% 9.7% 17.5% 1.6% 0.0% 3.0 3.1

Deals valued from $500,000 to $999,999 1.4% 0.8% 5.6% 5.9% 79.4% 72.3% 12.1% 21.0% 1.4% 0.0% 3.1 3.1

Deals valued from $5 million to $50 million 0.8% 0.0% 10.2% 10.3% 63.3% 58.8% 22.7% 30.9% 3.1% 0.0% 3.1 3.2

THANK YOU!

Scott Bushkie, CBI, M&AMI, IBBA ChairSBushkie@Cornerstone-Business.com

Lisa Riley, Ph.D., CBI, IBBA Market Pulse Chairlisa@LINKBusiness.com

Craig Everett, Ph.D.Director, Pepperdine Private Capital Markets Project

http://bschool.pepperdine.edu/privatecapitalcraig.everett@pepperdine.edu

Market Pulse Report Q2, 2016 vsQ2, 2015 - Rogerson Business Services · 2019-05-11 · Market Pulse...

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