We’ve been asked by many people in recent months whether the timing is right to sell their business. The short answer is yes!
There are obviously many factors that are in play when bringing a business to market. Obviously, the period around the Great Recession in 2008-2010 is an example of one of the tougher times to try and sell a business.
So, what factors do we see today that makes this a good time to sell?
First, we have seen a surge in buyers seeking good opportunities with companies that were able to survive and overcome the impact of COVID-19.
- Individuals are looking for an opportunity to purchase their own company to control their own destiny and begin to build wealth for themselves and not continue doing it for a corporate entity.
- Strategic buyers are very active currently looking for complimentary “bolt-on” acquisitions that can grow their market share, expand their customer base, or diversify their offerings to existing clientele.
- Private equity buyers are also very active as they are seeking to continue building their portfolio in certain industry sectors where they have a focus.
Second, we have seen the Small Business Administration step up their efforts to make acquiring a business more obtainable for buyers in the short term. Several current initiatives by the SBA include:
- Increasing the loan guarantee to 90% (through October 1, 2021).
- Waiving fees to the borrower and the lender for both the 7(a) and 504 programs.
- SBA making payments on P&I for the first six months of new loans (approved between February 1, 2021 and September 30, 2021 – subject to funding availability), capped at $9,000 per month.
Third, the current tax structure is as advantageous for a seller as it likely will ever be. Capital gains tax rates are currently low, however, the proposed tax plan by the new administration targets raising the capital gains tax rate to nearly double what it is today. There is consensus that the tax rates will likely not change in 2021 but there most likely will be changes in 2022. Any business owner thinking of selling their business in the next 3-7 years should strongly consider going to market as early as possible in 2021 in order to close by year end to avoid the potential additional tax hit.
Viking Mergers & Acquisitions celebrates its 25th anniversary this year and has assisted over 600 business owners successfully exit their company. We offer a no-cost, no-obligation valuation service to business owners who would like to understand the market value of their business. We welcome the opportunity to assist any interested business owner in developing their ultimate exit strategy! Our services are provided in a completely confidential manner.