Vesticor - Q2 2016 Market Update - FINAL

1
Q2 2016 Private Company M&A Update
July 2016

2PRIVILEGED & CONFIDENTIAL
TRENDS IN THE U.S. M&A MARKET
Q2 2016 Private Company M&A Update – July 2016
Vesticor Advisors │
 This report provides general trend information on
valuation multiples and profit margins for private
transactions in the lower middle U.S. market
 Financial advisors, business owners and many others
can use this data to determine the value of a company
by applying the market approach with comparable
company data
 Median Selling Price for private businesses has hovered
around $200k for the last decade
 Companies with Sales under $1 million tend to have the
lowest MVIC/EBITDA and MVIC/SDE multiples, while
companies with Sales over $5 million tend to have the
highest MVIC/EBITDA and MVIC/SDE multiples
– However, acquisition multiples vary materially
by industry sector and size and type of selling
company
 Median Gross Profit Margins for all industry sectors
surveyed is 60% while Median Operating Profit Margins
is 9%
 Construction, Manufacturing and Retail Trade have
seen the most transaction activity over the last five years
Distribution of Transactions by Major Industry
All Buyers
Overview
Agriculture, Forestry & Fishing
Mining
Construction
Manufacturing
Transportation, Communications, Electric, Gas & Sanitary
Wholesale Trade
Retail Trade
Finance, Insurance & Real Estate
Services
Source: Pratt’s Stats Private Deal Update. Business Valuation Resources, LLC.

PRIVATE DEAL ACQUISITION MULTIPLES
Average Selling Price and Average Revenue
For Private Buyers
$1,306,514
$729,203

Median Selling Price and Median Revenue
For Private Buyers
$205,000
$487,729

Median MVIC / EBITDA by Revenue Range
For Private Buyers
 Companies with sales under $1 million tend to have the lowest MVIC/EBITDA multiple, while companies with sales over
$5 million tend to have the highest MVIC/EBITDA multiple
4.40x
4.34x
2.78x

Median MVIC / EBITDA by Sector
For All Buyers
 Chart displays median valuation multiples across the major industry groups
 The data in the table and graphs include all transactions from all years and all buyer types
Agriculture,
Forestry &
Fishing
Mining Construction Manufacturing Transportation,
Communications,
Electric, Gas &
Sanitary
Wholesale
Trade
Retail
Trade
Finance,
Insurance &
Real Estate
Services
Median for All Sectors

Median MVIC / Seller’s Discretionary Earnings by Revenue Range
For Private Buyers
3.53x
 Companies with sales under $1 million tend to have the lowest MVIC/SDE multiple, while companies with sales over $5
million tend to have the highest MVIC/SDE multiple
2.78x
2.12x

Median MVIC / Seller’s Discretionary Earnings by Sector
For All Buyers
 Chart displays median valuation multiples across the major industry groups
 The data in the table and graphs include all transactions from all years and all buyer types.
Agriculture,
Forestry &
Fishing
Communications,
Electric, Gas &
Sanitary
Wholesale
Trade
Retail Trade Finance,
Insurance &
Real Estate
Services

INTERQUARTILE RANGE – ACQUISITION MULTIPLES
Median MVIC / EBITDA Interquartile Range by Sector
For All Buyers
 Chart displays the interquartile range of the MVIC/EBITDA multiples by major sector
 Interquartile range is the difference between the 25th and 75th percentiles (also called the first and third quartiles), so the
interquartile range describes the middle 50% of observations
 The top of the orange rectangle indicates the 75th percentile, the bottom of the blue rectangle indicates the 25th percentile,
and the line where the two rectangles meet represents the median
Agriculture,
Forestry & Fishing
Construction Manufacturing Transportation,
Communications,
Electric, Gas &
Sanitary
Wholesale
Trade
Retail Trade Finance,
Insurance &
Real Estate
Services
Multiple Q2 2016 Private Company M&A Update – July 2016

INTERQUARTILE RANGE – ACQUISITION MULTIPLES
Median MVIC / EBITDA Interquartile Range by Year
For All Buyers
 Chart displays the interquartile range of the MVIC/EBITDA multiples by major sector
 Interquartile range is the difference between the 25th and 75th percentiles (also called the first and third quartiles), so the
interquartile range describes the middle 50% of observations
 The top of the orange rectangle indicates the 75th percentile, the bottom of the blue rectangle indicates the 25th percentile,
and the line where the two rectangles meet represents the median

SECTOR ACQUISITION MULTIPLES
Median MVIC / EBITDA by Sector
For Private Buyers
 Chart displays median valuation multiples based on major industry groups, as identified by SIC code
 Note: Not all of the major industries were included in the charts and graphs, as there was not enough transactional data for
those industries to make the results meaningful
Agriculture, Forestry &
Fishing
Construction
Manufacturing
Transportation,
Communications, Electric,
Gas & Sanitary
Wholesale Trade
Retail Trade
Finance, Insurance &
Real Estate
All Industries

SECTOR ACQUISITION MULTIPLES
Median MVIC / Seller’s Discretionary Earnings by Sector
For Private Buyers
 Chart displays median valuation multiples based on major industry groups, as identified by SIC code
Fishing
Construction
Manufacturing
Transportation,
Gas & Sanitary
Wholesale Trade
Retail Trade
Real Estate
All Industries

SECTOR OPERATING MARGINS
Median Gross Profit Margins by Sector
For Private Buyers
 Chart displays median gross profit margins based on major industry groups, as identified by SIC code
Fishing
Construction
Manufacturing
Transportation,
Gas & Sanitary
Wholesale Trade
Retail Trade
Real Estate
All Industries

Median Gross Profit Margins by Sector
For All Buyers
 Chart displays median gross profit margins across the major industry groups
Agriculture,
Forestry &
Fishing
Communications,
Electric, Gas &
Sanitary
Wholesale
Trade
Retail
Trade
Finance,
Insurance &
Real Estate
Services

Median Operating Profit Margins by Sector
Private Buyers
 Chart displays median operating profit margins based on major industry groups, as identified by SIC code
Fishing
Construction
Manufacturing
Transportation,
Gas & Sanitary
Wholesale Trade
Retail Trade
Real Estate
All Industries

Median Operating Profit Margins by Sector
For All Buyers
 Chart displays median operating profit margins across the major industry groups
Agriculture,
Forestry &
Fishing
Communications,
Electric, Gas &
Sanitary
Wholesale
Trade
Retail
Trade
Finance,
Insurance &
Real Estate
Services

17
SOURCES AND DEFINED TERMS
PRIVILEGED & CONFIDENTIAL Vesticor Advisors │
Sources
 Pratt’s Stats Private Deal Update. Business Valuation Resources, LLC.
Defined Terms
Market Value of Invested Capital (MVIC): Total consideration paid to the seller and includes any cash, notes and/or securities
that were used as a form of payment plus any interest-bearing liabilities assumed by the buyer. The MVIC price includes the non-
compete value and the assumption of interest-bearing liabilities and excludes (1) the real estate value and (2) any earn-outs (because
they have not yet been earned, and they may not be earned) and (3) the employment/consulting agreement values.
EBITDA: Operating Profit + Noncash Charges (Depreciation and/or Amortization)
Seller’s Discretionary Earnings (SDE) = Operating Profit + Noncash Charges + Owner’s Compensation
Gross Profit: Net Sales - Cost of Goods Sold
Operating Profit: Gross Profit - Total Operating Expenses
Gross Profit Margin: Gross Profit/Sales
Operating Profit Margin: Operating Profit/Sales

18
ABOUT VESTICOR ADVISORS
PRIVILEGED & CONFIDENTIAL Vesticor Advisors │
Boston, MA Denver, CO Lansing, MI
Vesticor Advisors
225 Franklin St.
26th Floor
Boston, MA 02110
Phone: (617) 334-7711
Vesticor Advisors
3801 E. Florida Ave.
Suite 400
Denver, CO 80210
Phone: (720) 379-4248
Vesticor Advisors
110 W. Michigan Ave.
Suite 300
Lansing, MI 48933
Phone: (517) 708-7243
www.vesticor.com
Vesticor Advisors provides M&A and capital raising advisory services exclusively to closely-held
companies in the lower and middle markets. Vesticor was founded on the principle that owner-
operated companies in the lower middle market are unique and require specialized advice when
considering strategic investment and exit opportunities. Vesticor addresses the needs of
entrepreneurs, founders and shareholders of private companies with specialized services across a
total of 13 industry-focused practices that cover all sectors of interest to middle-market investors.
Vesticor professionals bring a differentiated perspective to client engagements through
experiences as company founders, operators, investors and advisors.

19
DISCLAIMERS
PRIVILEGED & CONFIDENTIAL
The information, opinions and views contained in this report were prepared by Vesticor Advisors, LLC (“Vesticor”), and as such
constitute Vesticors’ judgment, and are subject to change without notice. The information presented in this report is provided for
informational purposes by Vesticor, and as such, is not a research report, as such term is defined by applicable law and regulations,
nor is it intended to be a solicitation regarding any securities transaction and or investment relationship.
While the information contained herein is believed by Vesticor to be reliable, Vesticor makes no representation or warranties as to
the accuracy, reliability or completeness of such information. The information, products and services discussed in this report are
provided on an “AS IS,” “WHERE IS” and “WHERE AVAILABLE” basis. Vesticor does not warrant the information or services
provided herein or your use of the information contained herein generally, either expressly or impliedly, for any particular
purpose and expressly disclaims any implied warranties, including but not limited to, warranties of title, non-infringement,
merchantability or fitness for a particular purpose. Vesticor will not be responsible for any loss or damage that could result from
the utilization of any information or services made available to you via this report.
The financial instruments discussed in this report may not be suitable for all investors, and investors must make their own
investment decisions using their own independent advisors as they believe necessary and based upon their specific financial
situations and investment objectives. Past performance is not necessarily indicative of future results. No part of this material may
be copied or duplicated in any form or by any means, or redistributed, without Vesticors’ prior written consent. Vesticor and/or its
affiliates may seek to provide investment banking services for companies mentioned in this whitepaper.
Securities Offered Through: Advisory Group Equity Services, Ltd., Member FINRA / SIPC
444 Washington Street, Woburn, MA 01801; (781) 933-6100

Vesticor - Q2 2016 Market Update - FINAL

Recommended

Recommended

More Related Content

What's hot

What's hot (16)

Viewers also liked

Viewers also liked (11)

Similar to Vesticor - Q2 2016 Market Update - FINAL

Similar to Vesticor - Q2 2016 Market Update - FINAL (20)

Vesticor - Q2 2016 Market Update - FINAL