Small Business Acquisitions Show Resilience Amid Economic Complexity

Key Insights from the BizBuySell Fourth Quarter 2024 Insight Report

The small business acquisition market proved resilient in 2024, showcasing steady growth and evolving buyer and seller dynamics despite a challenging economic landscape. According to the BizBuySell Insight Report, 9,546 small businesses changed hands this year, marking a 5% increase in transaction volume compared to 2023. The total value of these deals surged 15% to $7.5 billion, driven by a rise in higher-priced transactions and increased activity in key sectors like manufacturing, technology, and construction.

Transaction Growth and Sector Performance

While overall transaction volume climbed, growth was not uniform across sectors. The manufacturing and technology industries stood out, experiencing year-over-year increases of 15% and 74%, respectively. Manufacturing benefitted from geopolitical tensions and supply chain disruptions, prompting a renewed focus on domestic production. Buyers in this sector paid a median sale price of $700,000, with valuations reflecting a 9.5% rise in cash flow multiples.

The technology sector, while seeing a meteoric rise in transaction volume, witnessed a 24% decline in median sale price to $650,000. This trend underscores the sector’s rapid evolution, with buyers focusing on AI-driven and e-commerce businesses, even as valuations cooled. Meanwhile, building and construction saw a 10% increase in acquisitions, buoyed by infrastructure investments and steady demand.

In contrast, retail, service, and restaurant sectors remained largely flat, with modest gains in transaction volume and sale prices. The service industry accounted for 40% of all transactions but saw only a 2% uptick.

The Limited Impact of Rate Cuts

A surprising finding in 2024 was the minimal impact of Federal Reserve rate cuts on the small business acquisition market. Despite three incremental rate reductions aimed at stimulating borrowing, 60% of surveyed buyers reported that the cuts did not affect their purchase timelines.

This phenomenon can be attributed to several factors:

1. Tight Lending Standards: Commercial lenders maintained stringent underwriting criteria, limiting the benefit of lower rates for buyers seeking acquisition financing.
2. Economic Uncertainty: Broader concerns about the U.S. presidential election and geopolitical tensions overshadowed the potential positive effects of rate cuts.
3. Buyer Sentiment: Only 17% of buyers accelerated their purchase decisions due to rate cuts, while 23% remained uncertain, highlighting the psychological complexity of buyer behavior.

Challenges and Opportunities in 2025

The report also revealed hurdles for buyers and sellers alike. Financing remains a primary challenge, with many transactions relying on creative solutions like seller financing to close deals. Sellers are increasingly motivated by retirement (38%) or burnout (35%), choosing to exit now rather than wait for potentially higher valuations.

Buyers, meanwhile, are focusing on stable, recession-resistant businesses, prioritizing financial performance above all else. However, only 15% of sellers have undergone professional valuations, pointing to a gap in market preparedness that could affect future deal flow.

Emerging trends in the buyer demographic are reshaping the market. The rise of “corporate refugees” — individuals leaving corporate roles to pursue entrepreneurship — now represents 42% of buyers. Younger entrepreneurs are also entering the market, drawn by opportunities in technology and niche industries with strong cash flow.

Sector Outlook: Manufacturing, Technology, and Private Equity

Looking ahead, the manufacturing sector is well-positioned for continued growth as supply chain localization becomes a strategic priority. Similarly, the technology sector, driven by advancements in artificial intelligence, is expected to remain a hotspot for acquisitions, despite volatility in valuations.

Private equity’s growing presence in the small business market is another notable trend, with firms targeting niche industries offering stable cash flows. This influx of institutional capital could further drive competition and valuations in high-performing sectors.

Inflation, Tariffs, and AI Adoption

Despite cooling inflation, 78% of businesses reported rising expenses, putting pressure on profit margins. Concerns are also mounting over proposed tariffs, which could exacerbate costs and weigh on valuations. Nearly half of business owners surveyed are bracing for potential impacts from new trade policies.

Meanwhile, the adoption of artificial intelligence is accelerating. Over 51% of business owners are leveraging AI for marketing, analytics, and customer service, signaling a shift toward digital transformation in the small business sector.

Moving Forward

The 2024 small business acquisition market demonstrated resilience and adaptability in the face of economic complexity. While transaction volumes and valuations grew, the limited impact of rate cuts highlights the importance of understanding the nuanced interplay between lending conditions, buyer sentiment, and broader economic forces.

As we move into 2025, the market will likely continue to evolve, shaped by sector-specific dynamics, creative financing strategies, and emerging buyer profiles. For both buyers and sellers, preparation, adaptability, and a keen understanding of market trends will be essential in navigating the path ahead.