Is the middle-market M&A landscape experiencing a revival? In short— it may not be at the levels of 2021, but activity is showing signs of optimism.

According to Pitchbook, the median EV/EBITDA multiple for middle-market buyouts has hit 10.8x—the lowest since 2014. This decline suggests that, albeit at more conservative prices, private equity and sellers are finding common ground. In addition to the closing of valuation gaps, indications of an earnings recovery in 4Q23 and the amount of capital the private equity industry is sitting on could usher in more dealmaking as we head into 2024, assuming the earnings recovery is sustained.

This evolving trend signals a cautious approach from buyers in the current market environment. Consequently, both buyers and sellers must adopt a strategic and prepared position before engaging in the market.

Selling a small business is a nuanced process requiring meticulous planning. As sellers gear up for market entry amid signs of buyer caution, following these 5 essential steps will optimally position your business before a sale:

1. Identify Reasons for the Sale

Common motivations include retirement, partnership disputes, burnout, or boredom. Evaluate the business’s readiness alongside your timing.

2. Determine Business Value

Avoid pricing pitfalls by hiring a business appraiser to determine the accurate value of your business, considering (i) economic and financing conditions, (ii) industry dynamics, (iii) company-specific performance, (iv) market competition, and (v) deal size, among others.

3. Prepare for Sale

Invest time in enhancing financial records, legal structures, and customer bases to boost profitability and ease the transition for the buyer. Collaborate with financial and tax professionals to strategize the best structure.

4. Find a Suitable Buyer

Identify a compatible buyer and navigate financial screenings and necessary steps to maintain momentum in the process.

5. Assemble a Professional Team

An experienced advisory team is crucial to safeguard your interests as a business owner, given the many complexities and unforeseen challenges that come with selling a business. This includes attorneys, accountants, and M&A advisors.

Amid market volatility, shifts in interest rates, and broader economic factors, many buyers and sellers have adopted a “wait and see” position. Current indications suggest that sellers, particularly of smaller, founder-owned businesses, may need to recalibrate their valuation expectations. However, a seller equipped with an experienced team of advisors could avoid accepting a lower valuation.

A study conducted by Northern Trust revealed that sellers accompanied by advisors received a 1.5x higher EBITDA multiple compared to those without advisory support.