Surprises to selling a company in COVID-19

We had several acquisitions working in March when everything shut down and were not expecting to initiate any new engagements until late summer. However, we did start discussions on a new acquisition at the end of May. Surprisingly to us, the response was overwhelmingly positive and, as of last week, we have nine bona fide offers to acquire this company, five of which are at or above pre-COVID market value. How could this be?

How does a Presidential Election Impact the Sale of My Business?

What happens to M&A in the run up to the 2020 Presidential Election? In past election years with an incumbent President, there has been a slowdown in M&A activity from October into mid-November, but how about 2016? Most experts got it wrong. Prior to the 2016 Presidential election, …

Is 2020 the right time to sell my company?

We were recently asked by a client if current market conditions are right for the sale of his company. There are two parts to the question: “current market conditions” and “for his company.”  The primary driver of the decision should be an analysis of his particular, unique business.  Current market conditions are an external driver of his company's performance and also impact the price a buyer will pay for his company, but they are only one factor of many factors that impact business valuation and timing for a sale.

Section 338 Business Sale –Stock Sale, with Asset Sale Tax Treatment

What is a 338 Election? How would I use it when I sell my business? In a typical acquisition (using an S-corporation as an example), the seller seeks to maximize capital gains, on which they pay a lower tax rate, and the buyer seeks to maximize the present value of tax deductions. While this may be desired, there may be a need to effect the transaction as a stock deal rather than an asset deal.

Acquisitions: Earnings Multiples or Absolute Valuations?

How is it possible to make an acquisition valuation based only upon earnings multiples in disparate economic environments and business climates? And how heavily should we rely upon “standard” earnings multiples for comparable transactions in an industry?

Lending for Business – Debt Ceiling Concerns?

In April and May, commercial and industrial lending was strong, companies were opening up new revolvers and refinancing at reduced rates. Banks were allowing extended maturities and were eager to put money to work; so much so, that some banks were loosening lending standards to offer favorable terms to those with less than strong credits.

Implications of Earnouts when you sell your business – Tax Focus

First, a couple of thoughts on earnouts when you sell your business. While an earnouts is often seen as a mechanism to defer payment of the purchase price; if used correctly, it should in fact be consideration to the seller of a company over and above full cash paid at closing. Earnouts should not be considered part of the purchase price if/until they materialize and are paid to the seller, but why not set additional opportunities to increase the purchase price paid, over and above the full cash price paid? If “x” is the maximum that a buyer will pay for a company in cash at closing, it is still possible to negotiate “x” at closing, plus an additional 25-50% or more after closing. As with most things in life and business, it is not the tool that is at fault, it is the way that it can be misused and misunderstood.

How would high inflation affect Oklahoma businesses?

Well, this may seem a strange day to write about inflation – I just read this morning that fixed-rate mortgage rates have dropped this week to the lowest level this year, with a 15-year available at 3.75%. However, it doesn’t do much good to dwell on the past or present – we should always be considering other scenarios in the future to stay ahead of the competition.

When should you sign a Letter of Intent – Business Buyer vs. Business Seller?

One purpose of a LOI is to document a mutual agreement between the buyer and seller on the major points of the purchase and sale of a business. With this in mind, a LOI is often signed much too early in the process. There is an understandable eagerness if you are selling a business to receive a Letter of Intent from a prospective buyer as early as possible. In some cases, business owners are even advised that they should request a LOI in order to learn price and terms from the prospective buyer.
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