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2017 Could Be Record Year For Small Business Mergers, Acquisitions: Research

It could be a record year for small business transactions, based on a recent BizBuySell Insights Report. The latest anecdotal evidence: A healthy 2,589 small business were bought or sold in the 3Q 2017. The number of year-to-date transactions has reached 7,491, which puts 2017 on course to break the previous record for small business transactions set in 2016.

Several factors could be contributing to the positive M&A environment, including a solid economy, optimism over tax reform, and the possibility of relaxed regulations under the current administration could be encouraging more entrepreneurs to become small business owners, the study’s authors assert. Among the other wildcards: All of the Baby Boomers who are nearing retirement age and looking to potentially exit their businesses, ChannelE2E notes.

Healthier Businesses

Source: BizBuySell

The M&A trend is also showing more deals closing and more of them closing at a faster rate. That’s likely thanks to the fact that small businesses are healthier overall, the study says.

Keep in mind the study involves all types of small businesses — not just IT service providers. Among the trends worth noting:

  • Business sold in Q3 of 2017 boasted a median revenue of $507,865, up 11.2 percent from the corresponding quarter 2016.
  • Meanwhile, the median cash flow for small businesses listed on BizBuySell was up 6.9 percent year-over-year, while the average multiple of revenue rose 2.8 percent.

Meanwhile, the median time to sell a business was down 14.6 percent year-over-year from 171 days in Q3 of 2016 to 146 in 2017. That surpasses the previous low of 154 days set in Q4 of 2014. That suggests a confidence in the small business environment, the authors assert.

Reality Check

Source: BizBuySell.com

Still, sales prices are down over the last two quarters. The median sale price fell from $237,000 to $225,000 from the first to the third quarter of 2017. The average asking price ratio also fell by 1.5 percent from the previous year.

The study’s author, BizBuySell, has a vested interest in these results given their position as the largest business-for-sale marketplace on the Internet. The company has been operating since 1996 and currently has an inventory of about 45,000 businesses across 80 countries for sale.

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