Key Factors that Drive Timing
  • Seller Factors
    • - Lack of capital
    • - Growth beyond comfort level
    • - Boredom / burnout
    • - Other interests
  • Market Factors
    • - Favorable economic climate
    • - Low interest rates
    • - Advantageous tax treatment
    • - Government regulatory changes
  • Buyer Factors
    • - Meeting growth expectations
    • - Slow organic growth
    • - Increasing competitive pressures
    • - Diminishing market share
    • - Globalization of industry

Myths of Private Company M&A

Selling a business when the owner is ready

Sellers do not control timing, the BUYER and the MARKET determine timing

  • Selling a business and achieving liquidity is likely to be the single most important financial event for a private business owner. Timing is perhaps the most critical factor to securing maximum value in the sale of a business.
  • While numerous factors may drive a seller to seek immediate liquidity in their business, unfortunately, the needs of the buyer and the conditions of the market ultimately dictate timing and value.
  • Selling a business when the owner is ready most often leads to eroded value. Achieving maximum value for a business requires the owner to be mentally and emotionally prepared, be "deal-ready," proactively monitor the M&A markets and move with urgency at the proper time.

Determinants of MARKET timing

  • Market timing is critical when evaluating the right time to sell a business. The economic climate, interest rates and the tax and regulatory environment all impact timing.
  • Interest rates are currently at their lowest levels in over fifty years, reducing required rates of return on investment ("ROI") for premium buyers of companies. Lower required ROIs allow premium buyers to pay more for acquisitions than ever before.
  • Low long-term capital gains tax rates are allowing sellers to retain more value than ever before. Currently, a seller can enjoy a 15% long-term capital gains tax rate (the lowest in history). However, these rates will be phased up to 20% over the next five years.

Determinants of BUYER timing

  • Public company premium buyers are pressured by Wall Street to meet revenue growth and earnings expectations. These buyers therefore actively monitor buying opportunities in order to rapidly improve upon limitations or weaknesses in their businesses. Premium buyers purchase companies to increase market share, expand geographically, acquire new products and gain competitive advantages.
  • Favorable accounting treatment for European buyers ending in 2005 has spurred cross-border M&A, driving up values for businesses and forcing US buyers to match European offers in order to compete effectively.

GW Equity understands the importance of timing

  • The GW Equity team has decades of collective experience selling private companies and are experts at evaluating and understanding the timing issues of both the market and buyers. We can show you how to use the timing of premium buyers and the market to your advantage.

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