What you need to evaluate—and the best way to do it
An extremely abundant supply of capital, a growing economy with historically low interest rates and ready buyers—all these conditions have emerged to create a seller’s market in business mergers and acquisitions. But does that mean you should sell now?
Factors to evaluate
Your outlook on the economy
The historic expansion has created a window of opportunity. For most industries, valuations remain at or above levels we saw during the last M&A peak (2006-2007). Indeed, as a savvy business owner, you have to ask: Can valuation conditions get any better than they are today? And how much longer can the current business cycle last?
Disruptive technology trends and industry dynamics
The decision about when to sell or transfer your business to others also needs to take into account the outlook for your industry, as well as your individual company’s prospects.
Businesses in some industries face uncertain futures due to emerging trends. Indeed, new technology is impacting the viability, profitability and attractiveness of businesses in some industries. That could both affect the valuation of your business and make running it more challenging in coming years. As a result, you have to decide if you are willing to commit both the time and capital needed to stay competitive or if you would be better off leaving those challenges for the next owner.
Personal and other considerations
In deciding when to sell your business, don’t discount considerations beyond valuation. You also need to consider how exiting your business—and the timing of that transaction—will impact family members, employees, the community and the company’s reputation and legacy.
A holistic approach to transition planning
Ideally, to ensure the best outcomes across the board—getting the best price, timing the transaction successfully and ensuring the best result for all stakeholders—business transition planning should be a deliberate, multiyear process. As such, it should be a process during which you review the financial and emotional viability of all options, including transition to children, transition to employees and sale to a third party.
It’s smart to leverage the expertise of a team of strategic advisors. Start with a wealth management advisor and a trust and estate planning attorney. If you choose to move forward with a sale process, you’ll need to consider adding an experienced M&A transaction attorney, an investment banker and an accounting firm with M&A experience.
Such a team of professionals can help you define your goals and evaluate various exit options. If you choose to sell to a third party, the team can help you run a rigorous, competitive M&A process.
BB&T Capital Markets, the full-service investment banking division of BB&T, is a leading middle-market M&A advisor and a resource for business owners that can assist in the preparation and execution of a sales transaction. To learn more, contact your BB&T relationship manager.
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The information provided should not be considered as tax or legal advice. Please consult with your tax advisor and/or attorney regarding your individual circumstances.
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