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M&A: Assess your timing

M&A: Assess your timing

Samantha LincolnQ. Is the timing right to sell my business? 

A. This question sparked my interest because on the night of Dec. 21, 2020, the winter solstice, Jupiter and Saturn will form the “Great Conjunction.” They will be in alignment closer together – just 0.1 degree apart – than they have been in nearly 800 years. (They align every 20 years or so, but this is the closest.) 

Only you and your adviser can assess your specific timing, but several “planets” are definitely aligned right now to make for good timing in 2021.  

Hungry equity 

There is more than $150 billion of private equity dollars on the sidelines – record levels – that need to be put to work. Where many sectors have suffered this year, home care has not. It has become an attractive target for new platform companies and add-ons, driving up both activity and valuations. 

Cheap debt 

Buyers of any stripe leverage debt capital for acquisitions, and the cost of debt capital is cheap relative to historical rates in both the public and private markets. Companies are eager to take advantage through acquisition, the fastest route to scale. 

Active strategics 

M&A activity in many home care sub-sectors continues to have a record year, as national and regional operators are actively consolidating still fragmented markets.   

Tax-incented sellers 

Many sellers seek to affect a deal before any (potential) tax legislation affects long-term capital gains rates. The overall activity volume is creating an active market with multiple offers, and greater comfort around achieving a full and fair market “clearing” price. 

So where is my particular planet in this alignment? 

Consider your business growth, stability and profitability; any specific headwinds or tailwinds; and your personal objectives from a transaction. In this frothy market, any personal objective can be accommodated, from full cash-out to earn-outs, partial exit with growth capital (representing two bites at the apple), and everything in between.  

Samantha Lincoln is a managing director at Paragon Ventures. Reach her at 415-786-8153 or [email protected]

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