No…this is not a promotional email to buy a new Lexus with a giant bow on top right in time for the holidays. But as we sit here in mid-December, I cannot help but reflect on the last twelve months and what we all thought this December would look like.
JK Galbraith famously said, “there are two kinds of forecasters: those who don’t know, and those who don’t know they don’t know.” For many of us in the investment banking industry, we felt like we knew (and were proven right) that 2021 would shape up to be an active year for M&A. There was a confluence of circumstances that turned 2021 into the Sales Event that it was: discord and discussion in the Spring around potential capital gains rate changes, a market hiatus of deals in 2020, business owners fatigued after running their businesses during COVID and wanting an exit, dry powder from investment firms ready to make deals. Globally, 2021 saw the strongest opening nine months of M&A since records began being tracked, with the US alone seeing a 139% surge to over $2tn in deals.1
Now as we head into the final weeks of the year, service providers (bankers, lawyers, accountants) in our industry are working hard put big red bows on top of deals before 12/31/2021. While it will take a few weeks into 2022 to know how strong of a year this was, it is my opinion this will serve as a banner year for a long time to come.
Now if you’re a business owner reading this and having FOMO (Fear of Missing Out), don’t. The time to sell your business is not when everyone else is but when it is right for you. We’ve had specific clients push their transaction timeline back into future years, not because of distractions or lack of access to service providers, but because the timing wasn’t right for them. And while we cannot forecast (as JK Galbraith reminds us) what exactly will happen to capital gains rates or other outside factors affecting your business, as an owner with the right banking partner, you can control for certain factors.
So, if you won’t have your Sales Event in 2021, here is an early holiday present: the RKCA Three Keys To Value Maximization:
- Early Preparation
- In a sale process, speed is everything. Outside of a slip in performance, speedbumps in the sale process are a major contributor to decreased valuation and buyer interest in a process.
- Failure to adequately prepare a business well-ahead of the sale can lead to numerous impediments to achieving owner objectives. Giving ample time to prepare documents, mitigate risks, and build a solid deal team are key to maximizing owner outcome.
- Develop a Strong Bench
- A major consideration for all buyer types is existing ownership/management’s desired role post-transactions. Some buyers may prefer a complete management transition, while others may only be interested in a transaction that includes retention of ownership/management.
- An important way to ensure flexibility in a sale process is for existing ownership to focus on nurturing and developing a skilled second tier of management.
- Performance During Process
- The surest way to impact valuation in a process is through performance. Improving performance year-over-year will drive valuation. Declining performance will lower valuation and potentially lead to buyers walking away from a deal.
- Preparing your business for sale ensures it is ideally positioned to continue performing. Preparations for strong performance can be established and data collection can begin, thus reducing the strain of a sale process on leadership.
At RKCA, our mission is: “A Life’s Work, Realized.”™ If you or a business owner you know is still looking to realize a life’s work, we’d love to meet.
Would you be interested in learning more of our Build to Sale Strategies? If so, email me: nursic@rkca.com
- Refinitiv Global Insights Survey, October 2021.
Disclaimer:
The content of this material was obtained from sources believed to be reliable. However, RKCA does not warrant the accuracy or completeness of any information contained herein and provides no assurance that this information is, in fact, accurate. The information and data contained herein is for informational purposes only and is subject to change without notice.
This material should not be considered, construed, or followed as investment, tax, accounting, or legal advice. Any opinions expressed in this material are those of the authors and do not necessarily reflect those of other employees of RKCA. Market data proprietary to source cited, may not be reprinted, reproduced, or used without permission from the source or RKCA.
The content of this material should not be construed as a recommendation, offer to sell or solicitation of an offer to buy a particular security or investment strategy. Investing involves the risk of loss. Past performance is not indicative of future results. Investment banking services provided by RKCA, Inc., Member SIPC/FINRA. Non-securities related services provided by RKCA Services, LLC. 1077 Celestial Street, Cincinnati, Ohio 45202. Phone: 513.371.5533.
Securities offered through and investment banking services offered by RKCA, Inc., member FINRA/SIPC. 1077 Celestial Street, Cincinnati, OH 45202. Investing involves the risk of loss. Past performance is not indicative of future results. Click here for important disclosures as well as our Form CRS.
The person(s) providing the testimonial(s) herein have experience in the services that RKCA, Inc. provides. Their respective experience with RKCA, Inc. may not be representative of all other Clients of RKCA, Inc. Testimonials are not paid for by RKCA, Inc. Testimonials do not constitute a guarantee of future performance or success related to any product, transaction or service.
© Copyright 2022 RKCA. All rights reserved.
