BY RALPH MONTGOMERY
Originally published in the Orlando Business Journal
Selling a business is typically a once-in-a-lifetime event. It can take many months or several years to plan properly for a profitable exit. For business owners already thinking about a sale, 2016 will complicate the planning process — it’s an election year.
While candidates duke it out in the political arena, the business community is left without a clear picture of what the next few years hold. But transaction-minded business owners have the power to vote for a candidate who could improve the country’s corporate climate and make a potential sale even more profitable.
So with every debate and stumping speech, it’s important to hone in on the following issues that could make a difference in the merger and acquisition landscape:
• Prosperity: A vibrant economy is one of the best determinants of a healthy M&A market. When customers have the means to buy products and services, companies have the cash and security they need to make an acquisition. Take note of candidates’ strategies for economic growth and long-term sustainability.
• Taxes: Tax rate proposals always find a place in election dialogue, and when they do, listen carefully — particularly when capital gains taxes are mentioned. These tax rates can affect take-home profits for sellers, so the lower they are, the more lucrative a transaction becomes. Do your due diligence to see if tax rate proposals are attractive or alarming.
• Regulation: Heavy-handed regulation can upset the market. Companies will need to spend their time, money and energy navigating regulatory changes, instead of focusing on growth and success. This can shift focus away from M&A transactions, so examine candidates’ commitment to legislative stability before casting a ballot.
• Energy: Energy laws can carry a heavy financial burden for many companies, particularly for those in the manufacturing industry. When restrictions are imposed, businesses may need to change their sources of energy or alter their entire scope of operations. It can make energy-intensive companies less attractive to potential buyers and raise the price of manufactured goods, taking a bite out of the economy.
• Labor: Having talented employees is both a necessity and an expense. In an optimal M&A environment, companies have access to the right employees, and investments in those workers are reasonable. To that end, examine the presidential hopefuls’ policies on wages and costs, stances on benefit mandates, labor pool initiatives and other workforce-facing items.
Look beyond November. Election year can be empowering for business owners. Like every citizen eligible to vote, a piece of the future rests in your hands.
Even still, remember that a strong M&A environment is relatively meaningless if your company isn’t ready to be sold. Focus on building and diversifying your customer base, training a strong team of leaders and improving profitability.
Give your vote attention, but give your business priority.