Growth Capital, Exit Alternatives Among Top Concerns at M&A Insight 2012
Houston, TX, May 15, 2012 --(PR.com)-- Attendees at M&A Insight 2012 weighed in on top challenges related to exiting their businesses at the May 3 discussion featuring panelists from Consolidated Graphics, Doeren Mayhew firm TR Moore & Company, Haynes and Boone, and Main Street Capital Corporation. With nearly 100 business owners and key M&A players in attendance, greatest concerns included:
1. Growth Capital (18 percent)
2. Exit Alternatives (13 percent)
3. Negotiations (13 percent)
4. Market Valuation (12 percent)
5. Trading Multiples (11 percent)
Panelist Tim Moore, managing partner and leader of the Houston investment banking arm of Doeren Mayhew firm TR Moore & Company, noted increased industry trading multiples and seller EBITDA in the current marketplace.
“During our last 12 months of transactions, EBITDA numbers and earnings have steadily risen, and industry multiples have followed suit, especially in the energy and manufacturing sectors,” Moore said.
In addition to higher multiples, a surplus of buyer capital and increasing taxes in 2013 are among the reasons Moore said 2012 may be the year to sell.
“A driving force behind sellers’ current motivation to exit is the expected tax hikes in 2013,” he said. “Capital gains tax rates set to increase from 15 percent to 20 percent at the end of 2012, paired with the potential Medicare tax of 3.8 percent, could mean nearly $90,000 in additional tax on every $1 million in proceeds.”
With a business sale taking anywhere from six to nine months, business owners who are inclined to optimize after-tax dollars by selling this year need to act soon, Moore added.
Moore highlighted three key factors to consider before taking your business to market:
1. Compare where your industry’s multiple is trading to what you need after the sale. If they’re not aligned, then it may not be the right time to sell. Deals often get killed because there is gap in expectations between buyer and seller. Focus on building your value drivers to better meet your exit objectives.
2. Know your optimal time to sell. Transacting while your business is on the way up usually creates the best pricing results. Too often business owners think waiting will command a higher price later, but you never know when market conditions will change again.
3. Create a systems- versus owner-driven business. If you can leave the business and have it operate at the same level without you, then you will command a higher price and more in cash up front. This should be every business owner’s ultimate objective, whether they’re looking to transact this year, or years from now.
For those ready to exit, Moore emphasized the importance of adequate preparation.
“At the end of the day, always be sure there are no surprises,” he added. “Keep company records in good shape, work with your management team to make sure you’re getting the information needed in the due diligence process, continue focusing on business growth, and bring in your legal, accounting and investment banking professionals before you begin the process.”
About TR Moore & Company, A Doeren Mayhew Firm
The Southwest regional location of top 100 CPA firm Doeren Mayhew, TR Moore & Company is a Houston CPA firm that goes beyond traditional accounting to help owners of mid-sized businesses reach their profitability and exit objectives. Specializing in accounting manufacturing, service, wholesale, retail, construction/real estate, energy and technology companies, the firm provides Insight into a client’s business and industry, Oversight of accounting practices and Foresight for what’s ahead. For more information, visit www.trmoore.com.
1. Growth Capital (18 percent)
2. Exit Alternatives (13 percent)
3. Negotiations (13 percent)
4. Market Valuation (12 percent)
5. Trading Multiples (11 percent)
Panelist Tim Moore, managing partner and leader of the Houston investment banking arm of Doeren Mayhew firm TR Moore & Company, noted increased industry trading multiples and seller EBITDA in the current marketplace.
“During our last 12 months of transactions, EBITDA numbers and earnings have steadily risen, and industry multiples have followed suit, especially in the energy and manufacturing sectors,” Moore said.
In addition to higher multiples, a surplus of buyer capital and increasing taxes in 2013 are among the reasons Moore said 2012 may be the year to sell.
“A driving force behind sellers’ current motivation to exit is the expected tax hikes in 2013,” he said. “Capital gains tax rates set to increase from 15 percent to 20 percent at the end of 2012, paired with the potential Medicare tax of 3.8 percent, could mean nearly $90,000 in additional tax on every $1 million in proceeds.”
With a business sale taking anywhere from six to nine months, business owners who are inclined to optimize after-tax dollars by selling this year need to act soon, Moore added.
Moore highlighted three key factors to consider before taking your business to market:
1. Compare where your industry’s multiple is trading to what you need after the sale. If they’re not aligned, then it may not be the right time to sell. Deals often get killed because there is gap in expectations between buyer and seller. Focus on building your value drivers to better meet your exit objectives.
2. Know your optimal time to sell. Transacting while your business is on the way up usually creates the best pricing results. Too often business owners think waiting will command a higher price later, but you never know when market conditions will change again.
3. Create a systems- versus owner-driven business. If you can leave the business and have it operate at the same level without you, then you will command a higher price and more in cash up front. This should be every business owner’s ultimate objective, whether they’re looking to transact this year, or years from now.
For those ready to exit, Moore emphasized the importance of adequate preparation.
“At the end of the day, always be sure there are no surprises,” he added. “Keep company records in good shape, work with your management team to make sure you’re getting the information needed in the due diligence process, continue focusing on business growth, and bring in your legal, accounting and investment banking professionals before you begin the process.”
About TR Moore & Company, A Doeren Mayhew Firm
The Southwest regional location of top 100 CPA firm Doeren Mayhew, TR Moore & Company is a Houston CPA firm that goes beyond traditional accounting to help owners of mid-sized businesses reach their profitability and exit objectives. Specializing in accounting manufacturing, service, wholesale, retail, construction/real estate, energy and technology companies, the firm provides Insight into a client’s business and industry, Oversight of accounting practices and Foresight for what’s ahead. For more information, visit www.trmoore.com.
Contact
TR Moore & Company, A Doeren Mayhew Firm
Erika Yanez
713-789-7077
www.trmoore.com
Erika Yanez
713-789-7077
www.trmoore.com
Contact
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