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Timing Your Business Exit for 2021 – with ArkMalibu

This post is brought to the OCEAN Community in partnership with ArkMalibu

Time To Act May Be Now: Consider Your Exit Strategy & Timing Amidst Tax Policy Change Uncertainty 

If you are a private business owner who is considering an exit, it may be time to consider starting the process sooner rather than later. Check out ArkMalibu’s market snapshot with insights on timing your exit here. 

The year 2020 was riddled with unforeseen consequences to the capital markets, M&A markets, the economy, and the daily lives of billions of across the globe. Add in the political uncertainty in the U.S. with the election, and how that would then impact future policy decisions, and many business owners were not sure how their business would be impacted come 2021. 

Now that we are a full quarter into 2021, and while we don’t have all the answers to the burning questions many ask around policy changes, what does seem to loom on the horizon is a potential tax policy change. What exactly is the impact of a change in tax policy for a business owner? The most pressing change under consideration is that of a rise in capital gains tax. 

The Striking Effects of Capital Gains Tax Increase

  • -25%: A capital gains tax increase could be worth over 25% of your company’s net value 
  • +3.4x: 3.4x is the necessary multiple increase required to receive the same after-tax proceeds in a capital gains tax increase scenario

Begin Your Sale Process by June 2021 to Circumvent Possible Capital Gains Tax Changes 

For those who are in the initial stages of considering an exit, it is important to factor in that an average M&A process requires 6 to 8 months from the start of the transaction to the transaction closing. 

With a possible tax policy change effective January 2022, speed is of the highest importance in getting to market before this change takes effect. 

What Other Factors Should Lead Me To an Exit Process Sooner Rather Than Later?

The possible tax policy change is not the only factor for consideration when discussing exit timing. 

The M&A market remains strong and continues its fourth wave. Demand persists for great companies, inciting urgency for sellers in a variety of industries.

M&A market highlights include:

  • $1.5 trillion in dry power available from private equity groups across the globe
  • $670 billion in cash and equivalents reported on strategic acquirers balance sheets
  • 206 SPACs ready to deploy $415 billion
  • Low interest rates
  • Record-level valuations
  • Supply has returned, with deal count bouncing back to 95% of pre-covid levels
  • Deal processes are being completed fully remote, creating new efficiencies amidst travel restrictions 

Want to Know More?

Contact ArkMalibu, an investment bank serving middle market business owners and helping them navigate the largest transaction of their lives. ArkMalibu’s approach in representing sellers is unconflicted, unorthodox, and unrelenting. 

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