WHY IS IT A GOOD TIME TO CONSIDER SELLING NOW?

With the potential rise of capital gains tax rates on the horizon, owners considering an exit in the near future are advised to move with deliberate speed to prepare for a transaction, find and engage the right investment banking firm and execute before the end of 2021. In addition to these tax considerations, there is also a shortage in supply of quality companies for sale (especially in the wake of 2020’s lockdowns) and a massive oversupply of liquidity with buyers and lenders leading to unprecedented and unsustainable valuations. Finally, recent volatility of interest rates could also put a damper on activity should it continue or if rates show sustained upward movement. Transactions generally take six to nine months to close after engaging an investment banker; being thoughtful on a timely basis now may save meaningful tax dollars later.

PREPARING FOR AN EXIT IN A SHORT WINDOW

While there are many things an owner can do to prepare for sale, such as assessing and improving the company’s management team (particularly to lessen the owner’s importance to the business); creating and executing a plan for growth (new markets, products or channels) or considering an overall strategy in response or anticipation of competitive, regulatory or other market changes, there are a couple of things business owners can do in the short window remaining in 2021 before going to market to improve their business’s value and create an environment where the likelihood of closing increases.

1. Review business forecast to ensure it is metrics-driven (e.g, unit and price driven). Such a forecast demonstrates thoughtfulness and credibility and lays out the strategic and operating business case for investors and buyers, creating value.
2. Create the best-fit transaction team for your deal. Transaction professionals are very busy right now. Quality opportunities brought to the best-fit attorneys, investment bankers and other transaction professionals by known referral sources will create a sense of urgency and accelerate the evaluation process. As a team is created, be mindful of right fit (not too large or small, industry experience and team chemistry). While cost is always important to keep in mind, remember the value created by transaction service providers is to minimize your downside risk post-deal, while maximizing value at closing and through the process.

The GHJ Team understands the current market and are able to guide you during the exit planning process. If you have any questions please reach out to GHJ’s Growth Planning and Strategic Advisory Team.