In December, 2011, The New York Times published an article entitled: Why Some Business Owners Think Now Is the Time To Sell.
While the decision to sell your business should be based on a careful analysis of many factors, that are several reasons highlighted in the article and confirmed by my own experience that 2012 may be a good year to sell.
- Expiration of the Bush-Era Tax Cuts. The current, very low tax rates on dividends and capital gains will automatically expire at the end of this year. While Congress may yet act to extend or moderate these scheduled tax increases, it seems likely that future tax rates will almost inevitably be higher than in 2012. Your tax accountant is your best source of information on how this might affect your personal tax situation, and early in the year as you’re finalizing your 2011 YE financial statement would be a good time to ask.
- 2011 was a good year for many small businesses, and 2012 is expected to be even better. Revenues have slowly returned to pre-2008 levels, and more importantly, many businesses have shown dramatic improvement in their bottom line and cash flow, based on their focus on cutting/controlling costs during the Great Recession.
- Buyers are numerous and well-funded. Strategic, corporate buyers are reporting record profits and have very strong cash positions and balance sheets. Private equity groups (PEGs) continue to be very well funded and are aggressively chasing what few quality companies are on the market. Community banks, as well as some large, national banks are beginning to once again offer acquisition financing for small, privately held companies. International buyers are still aggressively pursuing acquisition of US companies.
- Don’t want to miss this business cycle. Many business owners I talk with were thinking of selling just as the Great Recession arrived, and have been forced to delay their retirement and put all of their energy into successfully navigating their business through the most recent downturn and have no desire to do it again. Difficult to predict when the next economic downturn might occur; so now may be the time to act.
- Market may shortly be flooded with Baby Boomer sellers. As record numbers of Baby Boomers reach retirement age over the next 12 – 15 years, some observers predict that the market will quickly become flooded with Baby Boomer-owned businesses that need to be sold. One author estimates that $10 trillion of business wealth will change hands as the Baby Boomer generation retires. Should the supply of businesses available for sale exceed the demand, it will have a depressing effect on valuations.
If you know of a business owner who’s thinking of selling or buying a business and who might benefit from a free, confidential, consultation with us, have them contact me directly, and in strictest confidence, at 813.299.7862, or via e-mail at email@example.com
By: Mike Ertel, Transworld M&A Advisors