BizBuySell.com Reports Record Decline in Business-for-Sale Transactions for Second Quarter 2009
Limited access to capital results in lower business valuations and fewer deals getting done
San Francisco, CA - July 6, 2009 -- BizBuySell.com, the Internet's largest marketplace for buying or selling a small business, today released economic data for the second quarter of 2009 that suggests small business-for-sale transactions and valuations have continued to decline as a result of the struggling economy.
According to the BizBuySell.com Second Quarter 2009 Insight Report, the number of closed transactions reported to the site in the second quarter of this year decreased by more than 50% as compared to the same time period in 2008, representing the largest year-over-year decrease shown in the data to date. Numbers from BizBuysell.com's first quarter 2009 report indicated a 36% year-over-year decrease in closed transactions, meaning even fewer deals are being closed as the year goes on. Closed transactions are reported to BizBuySell.com by business brokers nationwide.
"These numbers are not surprising as the economy continues to deter the consummation of business transactions at all levels," says Mike Handelsman, General Manager of BizBuySell.com. "There is no doubt that a large number of business transactions are not being closed simply due to the lack of available buyer capital and bank financing. While there are more potential buyers in the market due to high unemployment levels, they don't have the capital or the risk-profile they've had during better times. To make matters worse, banks just aren't willing to back business purchase transactions to the same level that they have in the past."
Popular Business Valuation Metrics Are Down
In addition to fewer completed deals, BizBuySell.com notes a decline in the metrics that are used to value companies. Compared to the same quarter in 2008, both revenue multiples and cash flow multiples have declined.
Revenue multiples on reported closed transactions dropped 2.5% to .68 in the second quarter of 2009. Similarly, cash flow multiples dropped to 2.59, representing an 8% decrease. The revenue and cash flow multiples are calculated by dividing the selling price of the business by its reported annual revenue or cash flow.
The median sales price for closed transactions also declined year-over-year, from $200,000 to $160,000 - a 20% decrease.
"Now more than ever buyers are being cautious about entering into business transactions," says Handelsman. "Many buyers are reluctant to pay the asking price for a business simply out of fear for the business's ability to survive current market conditions."
Key Takeaways for Business Sellers and Buyers
While current market conditions are preventing many business-for-sale transactions, some deals are still closing successfully. BizBuySell.com suggests that buyers and sellers consider the following attributes of closed transactions that have helped those businesses reach a deal:
The BizBuySell.com Second Quarter 2009 Insight Report includes business-for-sale metrics for the total U.S. and for more than 70 major metropolitan areas. Metrics are also available by industry and business type. The current Insight Report comprises data from 1,040 closed transactions and more than 27,150 active listings.
For more information on the BizBuySell.com Second Quarter 2009 Insight Report, visit /news/media_insight.html.
BizBuySell is the Internet's largest business for sale marketplace. Since 1996, BizBuySell has offered tools that make it easy for business owners and brokers to sell a business, and potential buyers to find the business of their dreams. BizBuySell currently has an inventory of approximately businesses - spanning 80 countries - for sale at any one time and receives more than monthly visits. The site also features an extensive franchise directory as well as an easy-to-use business valuation tool. Please visit www.bizbuysell.com for more information.
BizBuySell was founded in 1996 and in 2012 became a division of CoStar Group, Inc. (NASDAQ - CSGP) - commercial real estate's leading provider of information and analytic services. CoStar conducts expansive, ongoing research to produce and maintain the largest and most comprehensive database of commercial real estate information and offers a suite of online services enabling clients to analyze, interpret and gain unmatched insight on commercial property values, market conditions and current availabilities. For more information, visit www.costar.com.
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