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How are Tax Law Changes Impacting M&A Activity?

By Generational Equity

Tax Laws M&A Activity

According to many analysts, the impact of new tax laws enacted at the end of 2017 are having, and should continue to have, a profound impact on M&A activity, and consequently how business owners approach selling a company.

We have discussed this in previous blogs, and the significance of these tax changes on selling a business shows no signs of slowing in the current market.

According to Ralph Della Ratta, CEO of Citizens Commercial Banking, some key portions of the legislation include:

  • Significant amounts of capital being repatriated back to the U.S. (estimated at $3 trillion)
  • Free cash flows are now much greater because of the substantially lower tax bite

According to Mr. Ratta, “The M&A market is going to benefit greatly from these changes.”

We concur with this assessment of M&A activity going forward based on what we have seen year-to-date in our own firm. At this point, we are approximately 17% ahead of last year in terms of deals closed – and last year was a record year for us helping business owners secure their optimal exit.

How are New Tax Laws Stimulating the M&A Industry?

Now certainly not every dollar repatriated, nor each one saved from lower tax rates, will be used for M&A transactions. However, as we have noted before, the fastest, most efficient and profitable way to grow a company is via acquisitions.

Even with a faster-growing economy, 5% organic growth simply does not present the same opportunities as an acquisition does, where post-close revenue and earnings can grow dramatically. These tax changes are important to know when selling a business, as the impact of this new tax legislation will continue to make this approach to company growth even more viable.

The tax law changes have only added fuel to the fire of one of the strongest seller’s markets in M&A in recent memory. With significant capital on the sidelines with private equity firms waiting to be invested, as well as the emergence of new types of business buyers, like family offices and offshore buyers, the number of deals expected to close this year should eclipse our record year of 2017.

Can You Benefit from these Tax Changes When Selling Your Business?

But, this important insight into current M&A activity only really matters if you, as a business owner, are prepared to take advantage of this market cycle. History tells us that it can take 7-10 years for a seller’s market to return once it ends, and these cycles present a great opportunity to sell your business for the maximum value.

To find out if you are ready, I invite you to attend a Generational Equity exit planning conference. We hold these regularly throughout North America, and they are designed to help business owners learn how and when to sell their business, and outlines the key steps involved in an optimal exit.

Let’s face it: Most business owners delay any exit planning until external circumstances force them to. That typically is not a good course of action, as it usually leads to undervaluing your company and negatively impacts the funds left over for the owner(s) once the deal closes.

What we are suggesting is that you create a well thought-out, planned exit strategy, one that optimizes the significant value you have built into your company and generates the largest return for you. That way, during times of significant M&A activity, you are prepared to capitalize and create the future you deserve.

How Do I Start the Journey to Selling My Business?

As mentioned, a great first step is attending a Generational Equity exit planning conference. Completely complimentary and highly educational, in just a few hours, your knowledge of M&A strategies will improve immensely.

To find one near you, click here. To learn more about Generational Equity, please use the following links:

Plus, you should also subscribe to our M&A insights blog for effective guidance in how to prepare and time your exit strategy and learn the latest updates from our industry.

By Carl Doerksen, Director of Corporate Development at Generational Equity.

© 2021 Generational Equity, LLC. All Rights Reserved.

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Bruce and I wanted to take this opportunity to thank Generational Equity for assigning Musa Jagne to our transaction. In Bruce’s words, “Musa did one hell of a job for us!”
Karen S. Williams, CFO, BW Manufacturing
We will highly recommend Generational Equity and Musa Jagne to any business owner about to embark on the same process.
Karen S. Williams, CFO, BW Manufacturing
We knew it would be a difficult task to have someone really understand our business and our market, prior to researching a possible buyer, so it was imperative that we found someone of your caliber, with definite proven experience in this area.
Rick Nowak, President/CEO, Kurz Electric Solutions, Inc.
The help you provided us during each step of this process made us feel very comfortable and confident we were selecting the right approach to transition our Company.
Andy Graham, Vice President, Modern Heating & Plumbing
T.D., thank you so much! You are a great leader! I love how you are using your gifts and talents to better others. You are clearly a GREAT COACH! This 3 day session undoubtedly changed the future of our business, and very well may have been the sole catalyst to save my company, my health and my marriage! A genuine “thank you” from the bottom of my heart.
Bryan D. Horn, Owner, Over Under Clothing
I couldn’t have asked for a better team than Michael and Deborah. We couldn’t have done it without them.
Robert Evans, President and CEO of Mealtracker Dietary Software
We thank you Eric and Generational Equity making our dream come true.
Larry Moore, Owner, A Company Portable Restrooms
We are extremely pleased with the way Generational Equity handled the sale of our company. Your associates, Tom and Chris, did an outstanding job of getting us (me) through the process.
Michael J Polarek, President, Paragon Packaging
I quickly recognized that Don was working for Sharpe Mixers above all else, and held our interests above others.
Jay Dinnison, Owner of Sharpe Mixers
Greetings Mike. Thank you for the captivating and compelling presentation you made at the Phoenix presentation last week. Over many years in business yours was the most informative and well-presented presentation, on any subject, that I have ever attended! Your energy and enthusiasm combined with your concise and captivating support of your positions with easily understood examples and data was compelling.
Pete L.
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Andy Graham, Vice President, Modern Heating & Plumbing
Generational Equity educated and informed us – so that we could be on the upside of a good decision (to sell).
Bil MacLeslie, CEO, ipHouse
We were happy to see the interest in our company and what we cherished has not just a valuable company but an important company to the communities we served in.
Larry Moore, Owner, A Company Portable Restrooms
We are very happy with the end result, and are very happy to be able to move forward with all of our future growth plans.
Rick Nowak, President/CEO, Kurz Electric Solutions, Inc.
Generational Equity’s assistance was invaluable in compiling and marketing our business.
Bil MacLeslie, CEO, ipHouse
I must say that I have never worked with a more driven, competent and focused individual as Don Ho.
Jay Dinnison, Owner of Sharpe Mixers
Michael worked tirelessly, He followed every lead meticulously and urgently to make sure nothing was missed.
Robert Evans, President and CEO of Mealtracker Dietary Software
I need to say an immense thank you to Don Ho for his stellar work ethic, attention to detail, and tireless effort. Also thank you to the whole crew at GE! Without you, Don could not do such a phenomenal job. We were shooting for closing and funding before the end of 2020, due to the uncertainty of the political landscape and taxes. I am happy to report we closed last week and will be funding tomorrow.
Dr. Caty J. Catron PhD, RN, VA-BC – Owner, Vic The Picc, LLC
I wanted to write you a quick letter to express our appreciation and our delight on the outcome of helping us through the process of our recent sale. We are very happy with the end result, and are very happy to be able to move forward with all of our future growth plans.
Terry D. Wickman, President, Keytroller
I would like to thank you and your firm, Generational Equity, for being our valued advisors in our journey.
Bil MacLeslie, CEO, ipHouse
Your wisdom and experience were invaluable to me during this once-in-a-lifetime transaction.
Ralph Noblin, President of Noblin & Associates
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Shenille Engelhart, Owner – CLS Technology
Thank you again for all your guidance and support. Any company will achieve what they intend, if they have you on their team!
Rick Nowak, President/CEO, Kurz Electric Solutions, Inc.
Tom Staszak is one of the most professional people I have dealt with in my last forty years of business. You’ve got a great group of people and you have built a truly professional organization.
Michael J Polarek, President, Paragon Packaging
I am pleased that I was able to work with Andrew Byrd throughout this experience. From the first meeting we had in Minneapolis I felt that I was in good hands. His knowledge and expertise is second to none. He guided the process consistently throughout. I feel lucky that I was pared with Andrew and could not be happier that I chose Generational Equity to handle this major life event. Thank you Andrew and GenEq for everything!
Eric Erlandson, Owner, Action Fastenings, Inc.
The process was much more involved than I expected and your help, experience and advice was a big factor in making the negotiations go as smoothly as possible.
Terry D. Wickman, President, Keytroller