Many business owners have been navigating their companies through 2020’s economic headwinds—perhaps unaware of important new market data that could affect their exit planning. Here is what they need to know now:
- Supply and Demand Dynamics Are Driving Valuations Above Pre-COVID Levels for the Right Companies
According to some estimates, only about half of all US middle-market companies fared well during the pandemic and meet buyers’ quality criteria. There are simply fewer high-quality sellers in the M&A market today.
Concurrently, the pool of interested strategic and financial buyers has increased with an estimated $1.6 trillion of private equity capital eager for deployment.
Transaction multiples are currently well above pre-COVID levels, often by 20% to 30% and sometimes higher.
Think of it this way:
Fewer Quality Companies + Surging Buyer Demand = Above Pre-COVID Valuations
- Risk of Tax Increases Creates Short Window of Opportunity
While we do not yet know the timing or the extent of tax law changes, we are all but certain that they are coming. We also are not certain when these changes will be effective; at some future point or applied retroactively.
However, we are certain that sooner is better than later in planning a business sale if one’s objective is to optimize net proceeds from a tax perspective.
For those company owners who agree that 2021 is their year, it is best not to delay. Doing so could introduce the risk of potentially not closing before the year ends.
We encourage you to be sure that your business-owning clients are aware of this combination of Peaking Valuations and Tax Planning Opportunities.
Let us Help You Start That Conversation
About ACT Capital Advisors
ACT Capital Advisors is a premier Mergers & Acquisitions (M&A) firm representing middle-market companies across all industries. ACT has a 30-year history of deal making, closing 200+ transactions and unlocking over $2.5 billion in wealth for its clients. More information at https://actcapitaladvisors.com/.