As a business owner considering the sale of your company, you may be asking yourself, “When is the right time to sell?” The answer is simple. The time is now.
The global recovery is underway, and 2021 has given us several reasons to be highly optimistic, and these reasons are why you should take action.
- Private equity (PE) expects to see record level fundraising this year. Even with lingering unknowns about the COVID-19 pandemic, analysts predict that the PE industry will raise an anticipated—and unprecedented—$330 billion in total capital in 2021. Such a healthy fundraising environment coupled with the existing $1 trillion in dry powder means very good news for those looking to sell.
- There is also an abundance of positivity surrounding EBITDA multiples. It is expected that 20 percent of buyouts will be priced above 20x EBITDA. Price multiples have been up for a while and this isn’t expected to change this year. Also, leverage should be propelled by low interest rates and there will be a strong demand for high-yield debt. Plus, there is already an excess of dry powder in direct lending funds.
In 2020, even amid the pandemic, more than 50 percent of deals still closed in the 8x-15x multiple ranges.
- Many business owners are under the misconception that this is a bad time to sell. While they are sitting on the sidelines, the market becomes more advantageous for those that have healthy businesses. Amid less competition, and with some companies struggling, profitable companies will be very attractive to buyers this year.
- The U.S. credit market has started off with a bang this year. Investors have already gobbled up $50 billion in new debt. Businesses are using the favorable rate environment to fund acquisitions, and mergers are predicted to be a key driver of bond issuance this year.
Other Considerations for U.S. Business Owners
In the long term, taxes are expected to increase in the U.S. in order to pay for the federal COVID-19 relief and stimulus packages that drove up debt in 2020. And now the United States now has a new presidential administration. President Biden has proposed tax hikes on long-term capital gains for those making over $1 million. These tax hikes are more possible now that Democrats control the House and the Senate. This is driving more owners to want to sell before the tax policy can be changed, which does take time. Nonetheless, closing sooner could shield you from potential capital gains increases.
Make Your Move Today
2021 is already the prime time to get your business on the market, but keep in mind that M&A transactions don’t happen overnight. It can take several months to complete a deal and plan your exit strategy. The sooner you get the process started, the better positioned you will be to get the deal that is best for you, and the less likely you will be to miss out on a great opportunity.
Americas: Sam Smoot at +1 (813) 898 2350 / Smoot@BenchmarkIntl.com
Europe: Michael Lawrie at +44 (0) 161 359 4400 / Enquiries@BenchmarkIntl.com
Africa: Anthony McCardle at +27 21 300 2055 / McCardle@BenchmarkIntl.com
ABOUT BENCHMARK INTERNATIONAL
Benchmark International’s global offices provide business owners in the middle market and lower middle market with creative, value-maximizing solutions for growing and exiting their businesses. To date, Benchmark International has handled engagements in excess of $6B across various industries worldwide. With decades of global M&A experience, Benchmark International’s deal teams, working from offices across the world, have assisted hundreds of owners with achieving their personal objectives and ensuring the continued growth of their businesses.