IBA Transaction Database Fundamentals
Data Gathered:
SIC Code number
Business type
Annual gross sales
Owner's compensation expense
This data category is not available for all transactions, and is of only marginal utility given the quality of small business financial statements.
Annual earnings before owner's compensation expense, interest expense, and income tax expense.
This data category is not available for all transactions, and is of only marginal utility given the quality of small business financial statements.
Year and month of sale
There are a few instances in which this data category is not available.
Sales price, which is defined as total consideration, including: cash, notes, liabilities assumed by buyer, and other consideration such as employment contracts or non compete agreements (Sales price is reported excluding any real estate).
Geographic information: city and state
There are some instances in which confidentiality considerations require omission of this information.
Ratio of sales price to gross sales
Ratio of sales price to annual earnings
This ratio is not calculated for those transactions for annual earnings information is not available.
Database Parameters:
Number of transactions in the database: 33,777
Number of transactions in the database in the following size ranges:
$0 - $500,000 in annual sales: 23,978 (70.99%)
$500,001 - $1,000,000 in annual sales: 4,823 (14.28%)
$1,000,001 - $5,000,000 in annual sales: 3,556 (10.53%)
$5,000,001 - $10,000,000 in annual sales: 381 (1.13%)
Greater than $10,000,000 in annual sales: 245 (.73%)
SIC categories in which there are:
At least 1 transaction: 785
At least 2 transactions: 603
At least 5 transactions: 425
At least 10 transactions: 305
At least 20 transactions: 197
At least 50 transactions: 109
At least 100 transactions: 58
The significance of number of transactions is that, the greater the number of transactions, the more accurately can the market be defined.
Not surprisingly, the SIC categories with the largest number of transactions correspond to the most common types of small and midsize businesses.
Some individual SIC categories with more than 100 transactions in the database:
SIC. Business Type No. of Transactions
5812 Eating Places 6129
8021 Dental Practices 2644
5813 Drinking places 1031
5411 Grocery Stores 956
7389 Business Services 847
7231 Beauty Shops 830
7215 Laundry & Dry-Clean 731
0782 Lawn & Garden 624
5541 Gasoline Stations 618
7349 Building Clean/Maint. 500
5992 Florist 497
5999 Misc Retail 469
5921 Liquor Stores 379
7538 Auto Repair 401
7299 Personal Services 395
8351 Day Care 357
8721 Accounting 352
2752 Commercial Printing 347
5947 Gift, Novelty Retail 313
7841 Video Rental 264
5461 Bakery 251
7532 Auto Body Repair 240
7212 Garment Pressing 229
7216 Dry-Cleaning Plants 227
5531 Auto and Home Supply Retail 214
5451 Dairy Product Retail 214
7331 Direct Mail Advertisers 209
5331 Variety Stores 201
4724 Travel Agencies Pressing 198
6531 Real Estate Agent/ Management 188
5962 Vending Machine Operators 187
5941 Sporting and Bicycle Shops 176
1711 Heating ,Plumbing A/C 172
CLICK HERE FOR ILLUSTRATION 3-1
Why isn't there more information per transaction?
It is difficult to persuade intermediaries to complete the form associated with business sales/purchases if they are required to "do a lot of work." Further, the more information requested, the greater the possibility for data transmittal error.
As discussed later in the tutorial, the information gathered and the resultant valuation multiplies, price to sales and price to earnings, are sufficient for valuation purposes. Use of these valuation multiples is discussed in the DMDM section of these tutorials.