The most authoritative source of accurate quarterly information for this private marketplace is the Market Pulse Report, a survey conducted jointly by the International Business Brokers Association and the Mergers & Acquisitions Source. The membership of both organizations is comprised of full-time professionals in the private business-for-sale marketplace. The following information is reproduced from the most recent survey of the membership conducted recently for the third quarter of 2025.
The survey studied five market segments by transaction size, ranging from below $500,000 to $50 million, as shown in the chart below.
Highlights From the Survey:
The Generational Transfer of Business Ownership Has Begun
The long awaited sale of Baby Boomer-owned businesses has begun. The leading edge of this population segment will turn 80 years of age next year. Many think this expected generational transfer was delayed by (1) Boomers staying healthier and more productive into their senior years, and (2) the recession of 2008-9 plus the COVID crisis of 2020/2021, when valuations plummeted and financing dried up. In any event, it’s now a significant market consideration.
The circular graph above indicates that almost 60 percent of the business sales in the third quarter were from Baby Boomers. Boomers were born between 1946 and 1964, a period of high birth rates following World War II. This generation is named for the “baby boom” that occurred in the United States after the war when soldiers returned home and started families. Today, a still significant percentage of business owners are ageing Baby Boomers.
Multiples of Earnings Valuation Formulas Are Stable
From the chart below, we see that valuation multiples for businesses selling for under $1 million remained relatively steady for the last three quarters. Mid-market multiples for business transactions between $1 million and $5 million showed a slight improvement. The over $5 million category showed a small dip in valuation multiples from the previous quarter but was up from the start of 2025.
The earnings metric used for businesses with a market value up to $2 million is Seller’s Discretionary Earnings (SDE), which more accurately reflects the owner’s benefit in most small businesses as compared to the Earnings Before Interest, Taxes, Depreciation, and Amortization (EBITDA), which is used in this survey for the earnings of companies selling over $2 million. All told, the privately held business-for-sale valuation environment is stable with no unusual swings in either direction.
Transaction Structure by Size
Sellers rarely receive all cash at close. In the third quarter of 2025, sellers averaged across all size categories 81 to 88 percent cash at close. Historically, average cash at close has remained fairly stable, hovering around the mid-80% range. Some lenders for business buyers require that the seller hold a note for a small percentage of the selling price. The graph below breaks down the transaction structure by size.
Who Is Buying and What Are They Buying
The data shows that first-time buyers are more active in the Main Street market, while strategic buyers and private equity firms become more prominent as the transaction size increases.
We can also see a pretty clear story about business expansion strategies. Smaller businesses are typically acquired by first-time business buyers seeking a business of their own, or as horizontal add-ons, where the buyer seeks to expand market share by acquiring a company in the same industry or offering similar products or services. However, once a business reaches a $5 million valuation or higher, that’s when we start to see vertical add-ons come into play, as buyers look to integrate companies within the same supply chain.
And what are they buying? Overall, this quarter’s M&A activities display a diverse range of industries attracting investment. Personal services and construction remain strong players in the Main Street market, while manufacturing and construction led in the lower middle market.
In Summary
According to this latest survey of professionals with real-time, in-depth knowledge, the business-for-sale marketplace metrics are stable, and the results are within normal quarterly variations.
Author’s disclaimer: William Bruce is a member of both the International Business Brokers Association and the M&A Source. He participated in this survey.
For further reading, here are additional articles on the issues of business valuation and ownership transfer:
- How to Use Valuation Guidelines to Estimate the Value of a Business
- What are the “Discretionary Earnings” of a Business?
- How to Analyze a Business You’re Considering Buying
- How to Make a Written CONTINGENT Offer to Buy a Business
- Seven Negotiating Rules When Buying or Selling a Business
- How to Conduct Due Diligence When Buying a Business
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William Bruce is an Accredited Business Intermediary (ABI) and Senior Valuation Analyst (SVA), assisting buyers and sellers of privately held businesses in the transfer of ownership. He currently serves as president of the American Business Brokers Association. His practice includes consulting services nationally on issues of business valuation and transfer. With offices in Fairhope, Alabama and Baton Rouge, Louisiana, he may be reached at (251) 990-5934 (Fairhope), 225-465-5799 (Baton Rouge) or by email at Will@WilliamBruce.org.
