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Quazar Quips© Volume 1, Issue 9

Current Market Update

We hope you had a great Thanksgiving and are fully recovered from eating too much turkey and stuffing!

For this month’s newsletter, we want to provide a market update. Overall, we continue to see a solid market for sellers. Even after a recent increase in Treasury Bond yields, interest rates remain low and banks generally remain eager to lend. Values and multiples have held steady or slightly increased in 2016 for transactions valued between $1 million and $5 million. Total SBA lending continues to grow on a year-over-year basis. Please see below for some more detailed market information.

The graph below shows that SBA 7(A) lending increased from 2015 to 2016, albeit at a slower rate than the previous year. All things considered, SBA lending remains strong and banks are eager to finance qualified buyers.
Source: sba.gov Weekly Lending Activity Report
As can be seen in the chart below, multiples have generally remained steady or slightly increased from 2014 to 2016. Please note that the chart uses Seller’s Discretionary Earnings (SDE) for transactions valued less than $2 million and EBITDA for transactions valued between $2 million and $5 million. For a detailed explanation of the differences between SDE and EBITDA, please click here for a previous edition of Quazar Quips.
Median Multiples Paid 2014-2016
Source: IBBA and M&A Source Q3 2016 Market Pulse Survey
The graph below shows 1-Month LIBOR, Prime, and 10-Year Treasury rates from 2012-2016. As can be seen, 1-Month LIBOR and 10-Year Treasury rates have recently begun to climb. However, the Prime Rate has thus far remained unchanged. As the Prime Rate is generally the most important interest rate for SBA borrowers, interest rates remain quite low for qualified buyers. 
1-Month LIBOR, Prime, and 10-Year Treasury Rates 2012-2016
Source: fred.stlouisfed.org Daily Interest Rate Data
We truly believe now is a great time to sell your business. Please contact Adam Webb at (763) 550-9555 for a confidential, complementary analysis of how the market would treat your unique situation. 

Thank you for reading Quazar Quips, a monthly newsletter discussing the Business Brokerage market for deals between $1 million and $5 million in value. Each month, Quazar Quips will keep you informed about statistics, trends, and helpful thoughts within the Business Brokerage deal space. Stay tuned for next month’s newsletter, where we will discuss “What to do with Conflicting Valuations.” If you or someone you know is thinking about selling their business, please contact Adam Webb at (763) 550-9555.
Bruce Behm is a licensed real estate broker of Quazar Business Brokerage
Quazar Business Brokerage©, 3535 Plymouth Boulevard, Suite 210, Minneapolis, MN  55447

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