2019 began on rough footing with the government shut down, which partially contributed to a dip in the number of transactions seen for Q1 2019. However, business brokers, sellers, and buyers are still confident in the market, and with good reason as a high number of businesses continue to trade hands. The quarters to follow will be more telling than Q1, as to whether we should expect numbers to continue to dip, or if a possible recession is still further along on the horizon.
Introduction.
The first quarter of 2019 had a reported total of 2,504 sold businesses. This is a 6.5% decline from the first quarter of 2018. Despite the minimal decline in businesses sold, it is important to consider that both 2017 and 2018 broke records in business sales reported to BizBuySell, pointing to the fact that overall the business for sale market is highly active. To underline this point, quarter one was actually the second highest first quarter in recorded history, trailing 2018. This data is difficult for nailing down whether a shift in the economic cycle is beginning to occur, ultimately we will have to wade through the next few quarters to see.
In a conversation with Bob House, the President of BizBuySell, Transworld’s President, Jessica Fialkovich had this to say about the small business M&A market, “The business sale market still continues to perform strong in 2019, in terms of number of deals getting done and the multiples sellers are receiving. However, we are seeing signs that the market could become more challenging in the future with interest rates rising and financing becoming both more expensive and harder to acquire. This can make the buyer process lengthy and more difficult, which would suppress multiples and extend time to close.”
General U.S. Market Highlights.
- 2,504 small businesses sold in Q1 2019, up from the 2,288 small businesses traded in Q4 2018, as reported by Biz Buy Sell.
- Q1 2019 showed a median revenue of $540,000, an uptick from Q4 2018 at $519,287.
- Median asking price increased from $259,000 in Q4 to $275,000 in Q1 2019.
- The average SDE multiple reached 2.97, a minor decrease from last quarter (2.99), and a further decrease from Q1 2018 (3.01).
- These multiples do show the ever so slight drop in activity this past quarter, but are still indicative of a healthy, active market.
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