Entering 2012, we expect to see a significant increase in middle-market M&A activity as businesses recover from the economic slowdown. For businesses that have successfully rebounded, or are in the process of rebounding, 2012 could be an ideal time to sell.
While there is still some uncertainty surrounding the current macroeconomic environment, we know for certain that private equity groups and ‘strategic’ buyers have large amounts of cash on hand, and will aggressively seek acquisition candidates to meet their investment and growth requirements. In fact, strategic buyers in the United States have increased the amount of cash on their balance sheets by 18% over the last year to $673 billion, while private equity funds have more than $500 billion in available capital. Banks and lending institutions are beginning to lend money again, and many companies are focused on future growth rather than recovery.
Another factor expected to drive M&A activity in 2012 is the likely expiration of the Bush Tax Cuts at the end of the year. Business owners that choose to sell before December 31, 2012 will take advantage of significant tax savings, as the long-term capital gains tax rate is expected to increase at least 5% in 2013.
Allied Business Group provides M&A advisory, as well as business valuation services to business owners and their advisors for a variety of purposes, including exit planning and transactions, estate and gift taxes, litigation and financial reporting. To learn more about us, please visit our website at www.AlliedBizGroup.com.
