A good year to sell my business? Yes, 2021 is shaping up to be a great year to sell your business. Below are some discussion points that reflect what we are seeing in the M&A marketplace:
Anticipated Tax Increase
There is the possibility of a significant increase in the long-term capital gains tax rate, possibly beginning next year in 2022. The proposed tax plan aims to nearly double the current capital gains tax rate.
Simply put, the current tax structure is as advantageous for a seller as it will likely ever be. If you are considering selling a business within the next three to seven years, it would be wise to consider selling now in order to close the sale before year-end and avoid the greater tax implications. While late in the year, strong businesses can still transact quickly. Still, it’s hard to say what Washington will actually do. How much of an increase? When would it be effective? Bottom line, the sooner you can get started on your exit plan, the better positioned you’ll be to make a decision.
We can better explain how much the tax increase may impact you specifically in a no-obligation, complimentary consultation.
There has been a tremendous amount of buyer activity nationwide and even in our greater Pensacola market in the past six months. As a professional M&A firm, that means GAI is able to choose from a larger pool of buyers and bring you some solid and well-qualified prospects. But, why?
- Attractive Resilience – All types of buyers, whether individual, strategic, or private equity, are actively seeking opportunities with resilient businesses that were able to withstand the impact of COVID-19. There is a lot of capital flowing to higher-yield activities, and the best companies are receiving the best offers.
- Growth Through Acquisition – With capital costs low, M&A is proving to be one of the more accessible paths for companies to achieve growth. Now is a particularly good time for strategic buyers to acquire complementary businesses that can expand their customer base, grow their market share, or diversify their offerings. Pensacola and the Gulf Coast remains attractive, as most of our industries are relatively fragmented. This makes it possible for buyers from outside to enter our market.
Buyer activity has also accelerated due to new lending incentives, especially from the Small Business Administration.
The Small Business Administration (SBA) has implemented several incentives to make acquiring a business more obtainable. This has created a sense of urgency for buyers to act before the incentives expire. Some incentives are currently set to expire on September 30, but it is likely the current administration will extend these benefits. Some current initiatives include:
- Fee Reductions – Reduces the cost of capital by waiving fees associated with the SBA 7(a) and 504 loan programs for borrowers and lenders. Historically, this fee has been 2-3% of the total project.
- Guarantee Amounts – Incentivizes lenders to make loans by temporarily increasing the guarantee up to 90% on 7(a) loans until September 30, 2021.
While taking advantage of good timing is advantageous, it is also important to be mindful of your overarching goals (e.g., retirement, lifestyle change, etc.). Make the most of the opportunity and take the appropriate steps to sell your business in a manner that helps you achieve your goals. Begin with securing professional representation; GAI has been serving clients for nearly 30 years, and we are here to help you get the best result possible. Contact us today for a confidential valuation and consultation.