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Good Reasons to Sell a Great Company
Given the ever changing dynamics in a global economy, and daunting industry trends, some owners are perplexed with the issue of how to get their capital out of the business efficiently. Finding ways to remove capital from a company is getting more difficult, and many owners aren’t sure what questions to start asking. This three page white paper will give you some critical things to think about before making that all important decision. To Sell or Not to Sell? Making The Decision. At the beginning of a new millennium, business owners are facing new and rigorous challenges. Continued restructuring of various industries and an increase in alternate channels, will continue to siphon sales from certain product lines and vertical markets. Given the ever changing dynamics in a global economy, and daunting industry trends, some owners are perplexed with the issue of how to get their capital out of the business efficiently. Finding ways to remove capital from a company is getting more difficult. Private company owners whose assets are primarily represented by non-marketable securities begin to feel a heightened sense of urgency to identify a way to transfer equity to cash since they are now keenly aware that the government does not want their private securities when they die. Passing stock to heirs is limited in its applicability due to the onerous, upwards of 55%, gift tax rates. Stock freezing techniques, which permit the stockholder to transfer future asset appreciation to heirs, have all but become a fading memory. There is, however, a way to get capital efficiently out of the company, namely, sell the company to outsiders. Unfortunately, premiums paid for many companies have eroded nearly 30% in recent history according to MergerStat Review. Additionally, fewer than 30 % of business transactions succeed, often because of a lack of planning. Finally, post sale cultural clashes have jaded many potential suitors. Many transactions have “earn-out” clauses, which tie the “goodwill” premium to the owner/seller’s ability to merge with a new culture. Another issue facing owners desiring to divest of their business is that chances are the seller founded the company on a shoestring and has essentially a zero basis from a tax perspective. Therefore the entire transaction is subject to capital gains tax, leaving an owner with only seventy to seventy-five cents on the dollar. The upshot of all this is that to successfully pull three generation’s worth of hard earned equity out of the business, potential sellers need to be better prepared and cognizant of eroding prices, tax implications, cultural fit with the buyers, and a host of other issues regarding a successful sale of their business. [continued...] Want to know more? Download the White Paper "Good Reasons to Sell a Great Company" for just $39.95. People who ordered this paper also ordered: |
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