Copyright The Philadelphia Inquirer
More small businesses are being sold, a new report says, but they’re selling for less as some companies’ financials weaken. The report by online business marketplace BizBuySell was based on data provided by more than 50,000 businesses across the country. It found that transactions are up more than 8% year over year and 11% over the last quarter — with both the service and retail sectors leading. But unfortunately, not all industries are seeing the same levels of mergers and acquisition activity. “The growing sectors listed in the report tend to have high seller-financing levels,” said Roy Mita, founder and principal intermediary of Plymouth Financial Group in Conshohocken, a mergers and acquisitions advisory firm. “Seller financing rates and terms are historically below commercial lending rates, making it easier to fund and close deals. The industrial sectors with higher levels of commercial funding are trailing behind, as interest rates remain high, making deals more costly,” Mita said. BizBuySell reported that despite the uptick in M&A activity, certain underlying concerns about the future did appear to be weighing on a number of business owners, with confidence declining over the past quarter. Small businesses are struggling with higher costs stemming from persistent inflation and ongoing tariff uncertainty, according to the report. Mita said most of the industrial company owners he speaks with have expressed uncertainty, with their primary concerns being about the impacts of new tariffs, inflation, and historically high interest rates. BizBuySell reports that while more owners appear open to selling, a number of businesses are showed weaker financials, and sale prices declined in the third quarter. “The owners simply cannot plan ahead, which makes it harder to prepare their companies for the marketplace,” Mita said. While any business owner faces external challenges, internal challenges often have the greatest impact, said Jeff MacAdam, a managing partner at the Bridlebrook Group, a business brokerage firm based in Broomall. “What may be tariffs or inflation today will be something else tomorrow,” MacAdam said. “The biggest challenges business owners face when trying to sell are often driven by navigating internal factors such as emotions, family, health, employees, business performance, or just knowing when the time is right.” According to BizBuySell, retirement remains the main motivation for an exit, as indicated by 42% of sellers surveyed. Regardless of this uncertainty, the expected conditions over the next few years could favor an increase in businesses being sold. Interest rates have been falling, stock market values and household wealth are up, and recent tax legislation ensures that federal capital gains and estate tax rates will remain low for the foreseeable future. An aging population looking to sell and an increased number of younger buyers — particularly millennials — looking to buy, also points to more small business M&A activity going forward. The data in the BizBuySell report is based on a wide variety of small businesses that span many different industry sectors, which are affected differently by external factors such as tariffs and inflation, MacAdam noted. He reports an increase in buyers looking for businesses that provide essential services — like HVAC, plumbing, or electrical — and businesses where tariffs or materials costs are not as much of a factor. “Over the past few months, and even years, the market has been heavily favoring sellers of fundamentally sound, profitable businesses,” he said. “Quality buyers are outnumbering quality sellers.” Mita is cautiously optimistic. In the industrial space, he said, the number of potential buyers has been surging over the last year, while the inventory of companies for sale has declined. According to BizBuySell, 77% of buyers remain confident they can purchase a business at an acceptable price today, and 78% expect to find the same or better value next year. “I expect the market for industrial companies to be strong and growing in 2026, as the owners learn to operate in our new normal, and the large buyer pool and lower interest rates drive values higher,” he said. This means that if you’re thinking of selling your business sometime in the future, it’s important to plan. To that end, MacAdam says prospective sellers should get educated, be prepared, and be ready to act in a timely manner. He recommends talking to an experienced business broker or M&A adviser to determine the market value of your business, learn about the sale process, and get as much information as possible so that you have realistic expectations about the marketplace. Mita advises starting the process early. “Being prepared from the start for the demands of due diligence and other parts of the sale process can help avoid costly mistakes,” he said. Mita noted that tax returns are “the gold standard” in due diligence “because the seller signs them under penalty of fraud,” so prospective sellers should take extra care with their tax records. “Funders, buyers, due diligence experts, and CPAs focus on tax returns,” Mita said. “Ensure they are accurate and defensible and also confirm the numbers can be supported to facilitate a smooth sale.”
