Insights

Boomers – Exit Stage Left!

May 20, 2021

It should come as no surprise that the lingering effects of the COVID-19 pandemic, and the unprecedented levels of stress and uncertainty took its toll on business owners.  Recent surveys by BMO Capital Markets have suggested that approximately 50% of those businesses are owned by Baby Boomers, with over 70% that do not have a succession plan in place to pass the business along.  Couple that with the fact that the potential tax changes could have significant negative effects on the after-tax proceeds, has many Boomers wondering is now the time to sell?

Reason 1. Boomer Burn Out

After weathering the pandemic, the fatigue is real. Many Boomers do not want to deal with the stress of another recession or the length of a potential recovery. Timing is key here before the excess capital in the market dries up or potential tax changes go into effect. Either it’s sell now, or possibly run the business for another 5-7 years, if not longer.

Reason 2. Taxes

Under the Biden Administration’s proposed tax plan, business owners could see their capital gains taxes double from 20% to 39.6% which would materially impact after tax sale proceeds.

Qualified Business Income (“QBI”) deductions are also under fire from the new administration, which has proposed accelerating their removal which would disallow some business owners from deducting up to 20% of their business income for tax purposes.

Reason 3. $$$Money$$$

Private Equity is flush with cash from years of a bullish market and continual fundraising. Latest estimates have the dry capital available for the purchase of private companies at $1.5 trillion. PE certainly doesn’t make a rate or return for its investors by returning capital, so they need to put that money to work.

During the pandemic, many companies put their M&A aspirations on hold. In a post-COVID world, growing businesses with steady cash flows continue to attract strong valuations. Valuations will remain high as the market stays frothy and competitive. It is still a sellers’ market…. for now.

There is now a private equity option for just about every type of transaction imaginable. Want to retain control after a sale? Walk away entirely? Roll equity into the new combined business? There is likely a suitor to meet your specific desires.

If you or anyone you know is contemplating selling their company, or have any questions on the above, or want to discuss your specific situation, please feel free to reach out to us at 972-644-7111 or email smartin@whiterockassociates.com

More Insights...

A Letter from the CEO-2022 Outlook and Recent Changes

January 6, 2022

We believe trust is the foundation of our relationship with each of our clients, and our people are our greatest asset. There is a war for talent right now sweeping through our city, our state, and our nation, and unfortunately, we have not been immune to its effects.

Tax Impact of Infrastructure Bill

December 23, 2021

President Biden recently signed a $1.2 trillion infrastructure bill into law, finalizing a key part of his economic agenda. The infrastructure bill is mainly a spending bill that is designed to make investments in roads, bridges, clean water, expanded access to high-speed internet, and the like.

A Letter from CEO Greg Hext

December 8, 2021

Just over 30 years ago, myself and Charles Chapman founded Chapman, Hext & Co., P.C. as a Dallas based CPA firm. Over the last three decades, the Firm has continuously grown and expanded to better support our clients’ goals and aspirations.

ERP System Introduction

October 18, 2021

With an ERP system, business entities are able to boost cash flow by better governing the invoicing and collection process and saving cost with improved inventory planning and procurement management.

Why ethical values are so important!

October 8, 2021

The business model created by the Committee of Sponsoring Organizations of the Treadway Commission, known as COSO’s framework, helps to achieve business objectives through internal control procedures.

Understanding Your Tax Liability

August 5, 2021

To implement the right tax strategies, you need to understand what is creating your tax liabilities.

What Can We Help You Achieve?

Thank you! Your submission has been received!
Oops! Something went wrong while submitting the form.
Hext Financial Group
972.644.7112
5001 Spring Valley Rd., Suite 850W, Dallas TX 75244
Copyright 2021  |  All Rights Reserved