Based on the input of several M&A experts, the general consensus is that the recently passed tax reform legislation will add fuel to the current strong seller’s market in 2018. This is how The Wall Street Journal put it in its December 21st issue:
The starting gun for the latest deal-making wave went off a couple of months ago when the contours of the tax bill started to come into focus. Now with the plan nearly done, mergers and acquisitions should accelerate next year.
One big positive for prospective sellers is that the lower 21% corporate tax rate will reduce the tax bill to companies that sell off business units. Another is the lower [tax] rate will give companies more cash to spend, especially at a time when share buybacks are less attractive because of high stock prices.
Finally, [and] companies with overseas cash will be able to bring it home.
We concur with this analysis. The dramatically reduced corporate tax rate, cut from 35% to 21%, will throw more cash to the bottom line and give corporate buyers added incentive to use the capital on a variety of business expansion strategies, especially M&A activity.
As The Wall Street Journal described it:
The tax bill was a gift to business. For some it will be a wedding gift.
Merger and Acquisition magazine recently interviewed Nixon Peabody partner Richard Langan Jr. who came to a similar conclusion:
I think there is a lot of enthusiasm in the middle market. There was a lot of uncertainty this year in M&A due to political uncertainty in Washington.
Now that the uncertainty relating to tax reform has been lifted, it is reasonable to assume that buyers who were on the sidelines during the latter half of 2017 will now more aggressively pursue their M&A plans in 2018.
Mr. Langan added:
There will be great investments by some companies including on infrastructure. It will cause them to make some M&A decisions particularly on the buyside. I think strategics, particularly in the middle market, will benefit from the reduction in corporate taxes.
This may also cause some family funds to consider M&A as opposed to interfamily transfers.
Last year was record year for Generational Equity in terms of deal closings. Given the trillions of dollars that will be available for investing purposes, combined with an expanding economy and interest rates still at historically low levels, we believe that the tax reform will simply add fuel to the active seller’s market we have been in the last few years.
Because of these reasons, we are strongly suggesting to business owners who attend our exit planning conferences that they prudently examine their options in the marketplace now rather than waiting.
History is littered with deals that were passed up in 2000 and 2008, right before two recessions hampered M&A activity. Since all seller’s markets eventually end, now is the time to act, as it takes 9-14 months to close most deals with optimal buyers.
If you are interested in learning how you can take advantage of the current seller’s market and the aggressiveness of today’s buyers, please contact us at 972-232-1121 or send us your information via our contact page and we will be in touch.
It really behooves every owner of a business today to investigate current M&A activity and the opportunities it offers.
By Carl Doerksen, Director of Corporate Development at Generational Equity.
© 2018 Generational Equity, LLC. All Rights Reserved.
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.
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
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
I would like to thank you and your firm, Generational Equity, for being our valued advisors in our journey.Bil MacLeslie, CEO, ipHouse
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
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
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
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
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
Your wisdom and experience were invaluable to me during this once-in-a-lifetime transaction.Ralph Noblin, President of Noblin & Associates
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.
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.
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
We thank you Eric and Generational Equity making our dream come true.Larry Moore, Owner, A Company Portable Restrooms
Generational Equity educated and informed us – so that we could be on the upside of a good decision (to sell).Bil MacLeslie, CEO, ipHouse
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
Generational Equity’s assistance was invaluable in compiling and marketing our business.Bil MacLeslie, CEO, ipHouse
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
Thanks again Phil and feel free to have a future client call me if they would like a referral. You are a true professional!Andy Graham, Vice President, Modern Heating & Plumbing
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
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.
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
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