M&A Activity in the RVA Small Business Community Starting to Calm Down

According to a recent BizBuySell Insight Report, small business acquisition activity has slowed after posting five consecutive quarters of year-over-year growth. The number of closed deals reported in the third quarter of 2022 dropped 2% year-over-year and was 4.5% lower than the number reported for the second quarter.

Just as importantly (if not more), small business asking prices in the third quarter dropped 13% as compared to last year. Median revenue of sold businesses in Q3 declined 11% from Q2 and 7% from the previous year. The average cash flow multiple declined to 2.5 from 2.9. These declining numbers indicate that small business sellers are reducing prices to accommodate buyers who are facing rising interest rates and higher acquisition costs. Also noteworthy is the reported median asking price for small businesses for sale in the Richmond area (according to BizBuySell’s database) was $450,000 during the third quarter with an earnings multiple of 3.03.

In short, while small business deal flow remains brisk, there appears to be a small break in the action from the break-neck pace observed over the past 24-36 months.  You can read the full Insight Report here.