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Baby Boomer Business Owners – Eleven Special Concerns For Selling Your Company

12 September 2008 No Comment

A generation ago someone running a private company had a fairly simple set of options when it was time to retire. Have the child(ren) take it over and collect retirement pay or sell it and live off the interest. Now things are more complex and the demographic wave adds another challenge. Here are eleven reasons why anyone contemplating the sale of a business in the next several years needs to start getting ready now.

  1. Boomers are a crowd whatever they do, in this case lots of business owners selling at the same time. That will affect the supply / demand / pricing.
  2. Tax and estate laws in a state of flux. Estate taxes for someone who dies in 2010 are zero unless the government changes something (likely) and states are decoupling their estate laws from federal laws.   Pre-transaction planning is both more difficult and more essential.
  3. We are currently in one of the long term trendless financial markets such as existed from 1906 to 1924, 1937 to 1950, and 1966 to 1982. Buy and hold is not a viable strategy and current volatility raises the risk even further.
  4. People are retiring earlier and living longer. The retirement years may be as many as the working ones.
  5. More blended families require more complex estate planning and children who are in the business may not be treated equally as owners.
  6. Children are not necessarily taking over the family business as was typical a generation ago.
  7. Fewer people stay at one company for their entire career making a management buyout less likely.
  8. The structure of business is changing, e.g. more outsourcing, and a company that’s been around for years may not be optimally organized for a buyer in today’s environment.
  9. Lots of cash (two trillion dollars worldwide) looking for deals increases the number of potential buyers that must be screened and contacted when taking a company to market.
  10. More options from financial buyers, e.g. recapitalizations, add to the number of scenarios that must be considered. Partial sales increase risk and potential reward.
  11. Weakness of US dollar increases the interest and activity of foreign buyers. A transaction may be more complex with overseas purchasers.

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