M&A and Exit Planning Trends 2021: Tax Changes, Market Outlook
•Transferir como PPTX, PDF•
0 gostou•50 visualizações
This document discusses trends in mergers and acquisitions (M&A) and exit planning for 2021. It first covers the impact of 2020 tax changes and provides an outlook for 2021. It then reviews M&A market trends in 2020, finding a 20% decline in deal activity and falling price multiples. The document also outlines the exit planning process and benefits of planning. It poses poll questions to business owners on their long-term goals, timelines, and definitions of wealth. The presentation encourages owners to assess their readiness by taking complimentary assessments.
Recomendados
Recomendados
Mais conteúdo relacionado
Mais procurados
Mais procurados (20)
Semelhante a M&A and Exit Planning Trends 2021: Tax Changes, Market Outlook
Semelhante a M&A and Exit Planning Trends 2021: Tax Changes, Market Outlook (20)
Último
Último (20)
M&A and Exit Planning Trends 2021: Tax Changes, Market Outlook
- 1. “M&A and Exit Planning Trends 2021” February 18, 2021
- 2. Today’s agenda 2020 Tax Changes and 2021 Perspective M&A Market Trends Exit Planning Process & Benefits Value Building Strategies Q&A
- 4. HOW READY ARE YOU?
- 5. Poll questions Long-Term Goals Time Horizon Defining Wealth
- 6. Owners Are 16% More Likely To Sell to 3rd Party Q. Which of the following best describes your long-term goal for your business? I plan to: N= 9,765 48% 2% 17% 28% 6% 56% 2% 12% 23% 7% Sell my business to a third party. Shut down my business. Transition my business to my kids. Transition my business to the next generation of managers. Other Pre-COVID During COVID Source: Value Builder System, 2020
- 7. 17% Drop in Time Horizon Most Owners Plan to Sell Within 5 Years N= 9,765 Q: How many years do you plan to continue operating your business? 33% 49% 39% 41% 2-5 years >10 years Pre-COVID During COVID Source: Value Builder System, 2020
- 8. Business Owners Definition of “Wealth” Has Changed N= 9,765 Q: Which of the following best describes your definition of someone who is wealthy? 20% 38% 42% 15% 38% 47% An individual with at least $10 million in investable assets. Having enough money saved up to cover your monthly lifestyle expenses for the rest of your life. Having enough money to do whatever you want, whenever you want. Pre-COVID During COVID Source: Value Builder System, 2020
- 9. Tax Changes and Outlook Impact on Future Deals 9 Mary Richter, Shareholder mrichter@schneiderdowns.com
- 10. RECAP- COVID-19 Legislation Families First Coronavirus Response Act • Wages paid 4/1/20-12/31/20 • Businesses with < 500 employees • Paid sick leave and expanded FMLA • Related payroll tax credits • Up to $511 per day/$5,110 total per employee for sick leave • Two-thirds of wages up to $200 per day $2,000 for FMLA CARES Act • $2.2 trillion • Individual & Business tax relief • Payroll tax deferral Loans - PPP, EIDL, Main Street Lending State and Foreign Legislation
- 11. Payroll Protection Program Loans • Provides small businesses with funds to pay up to eight weeks of payroll costs, including benefits. Funds can also be used to pay interest on mortgages, rent, and utilities. • Up to $10 million; Loan forgiveness available • Up to $2 million in PPP2, additional rules (300 employee max, more expenses) • Not taxable, expenses deductible for federal purposes » Impact on other tax deductions and credits (199A, R&D) » Consider which costs are included to be forgiven » State conformity? Impact on Financial Statements » Shown as debt while outstanding » Forgiveness is included in income » Impact on debt covenants
- 12. Employee Retention Credit Credit for 50% of wages paid 3/12/20-1/1/20. $5,000 max credit per employee • Full or partial shutdown pursuant to a government order or 50% reduction in gross receipts in a quarter • if < 100 employees, applies whether or not services were provided by employees • If > 100 employees, only for wages paid to employees who could not perform duties • Eligibility period extends until get to 80% of prior-year quarter receipts • Include health plan expenses for furloughed workers Credit for wages paid 1/1-6/30/21 • up to 70% of wages, max $7k per quarter • less than 80% of 2019 same quarter revenues • 500 employee threshold for ANY payroll CAN TAKE IF RECEIVED PPP, but not on same wages • Cannot stack benefits for same wages as other credits
- 13. Other Items to Consider • Business Interest Deduction Limitation • Increased to 50% of adjusted taxable income for 2020 • Rules modified to include all depreciation expense in EBITDA and exclude debt issuance costs and commitment fees from interest • Proposed regulations for debt financed distributions • Election to use 2019 ATI for 2020 limitation • Impact of debt modifications? Taxable income, exclusions available • Increased charitable contribution limits for 2020 • Employee Disaster Relief Payments - nontaxable to employee • Excess Business Loss rules repealed for prior years, suspended for 2020-2025 • NOLs generated in tax years 2018-2020 can be carried back five years • Elect to forgo NOL carryback (with 2020 return)
- 14. The Biden Administration Tax Plan 14 REPEAL TCJA COMPONENTS FOR HIGH-INCOME FILERS AND RETURN THE TOP TAX RATE TO 39.6% INCREASE THE CHILD TAX CREDIT AND DEPENDENT CARE CREDIT IMPOSE 12.4% SOCIAL SECURITY TAX ON INCOME OVER $400K PENALTIES FOR MOVING JOBS OVERSEAS ELIMINATE SECTION 1031 GAIN DEFERRAL FOR REAL ESTATE TRANSACTIONS INCREASE CORPORATE TAX RATE FROM 21% TO 28% AND ESTABLISH A MINIMUM TAX FOR BOOK INCOME OVER $100M 50% REDUCTION IN ESTATE TAX EXEMPTION, ROLLBACK LIFETIME GIFT EXEMPTION, AND ELIMINATION OF BASIS STEP-UP JOE BIDEN TAX POLICY PROPOSALS
- 15. Impact on M&A Deals • Due Diligence for COVID Credits, PPP loan • PPP Loan – escrow if forgiveness has not been finalized • Negotiate benefit for NOL carryback potential (through 2020) • COVID impact on valuation? Potential changes • Potential for higher tax rates • Potential for higher cap gains tax rates • Reduction of gift and estate tax exclusion • No basis step up from estate
- 16. M&A Market 16 Dave Eichenlaub, Managing Director dave@confluenceadvisors.com
- 17. M&A activity declined 20% during pandemic in 2020 $1,052.9 $1,158.1 $1,314.3 $1,236.6 $1,755.3 $2,011.1 $2,162.0 $1,946.3 $2,349.5 $2,147.7 $1,686.4 8,847 10,133 11,190 10,588 13,172 14,189 12,995 13,123 13,887 12,930 12,265 - 2,000 4,000 6,000 8,000 10,000 12,000 14,000 16,000 $- $500.0 $1,000.0 $1,500.0 $2,000.0 $2,500.0 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 2020 M&A Activity Deal Value ($B) Deal Count Source: Pitchbook
- 18. Selling price multiples fell as result of pandemic in 2020 6.0x 6.4x 6.2x 6.4x 6.4x 6.7x 6.8x 7.3x 7.2x 7.1x 7.2x 6.7x 0.0x 1.0x 2.0x 3.0x 4.0x 5.0x 6.0x 7.0x 8.0x 9.0x 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 9/20 YTD Q3 20 U.S. M&A Transaction Multiples for Companies $10-250min Value Source: GF Data
- 19. Today’s agenda 2020 Tax Changes and 2021 Perspective M&A Market Trends Exit Planning Process & Benefits Value Building Strategies Q&A
- 20. Laurie Barkman lbarkman@smalldotbig.com Brian Baum brian.baum@interchangecp.com Mary Richter mrichter@schneiderdowns.com Dave Eichenlaub dave@confluenceadvisors.com Chris Brodman CBrodman@metzlewis.com Connect with us
- 21. How ready are you? YOUR BUSINESS YOU, PERSONALLY Take the next step. Get your complimentary readiness assessments. Laurie Barkman Certified Value BuilderTM Advisor, lbarkman@smalldotbig.com
Notas do Editor
- Vast majority motivated by independence. Not to build the next google but to be in charge of their business.
- Vast majority motivated by independence. Not to build the next google but to be in charge of their business.
- Vast majority motivated by independence. Not to build the next google but to be in charge of their business.
- Our second driver of a happy and lucrative exit is called "Structuring Flexibility” which describes an owner’s willingness to consider multiple exit scenarios. A lot of founders make the mistake of approaching their exit with a rigid vision of how they see their exit. They imagine an acquirer writing them an outlandish check in exchange for the keys which the owner hands them as they ride off into the sunset. As we know, this is virtually never the case. Most founders will have to stay on to help a new owner transition into their business. The more flexible an owner is as they approach their exit — keeping all of their options open — the more buyers will be interested in exploring a deal. More buyers at the table means more competition which in turn leads to higher valuations and better deal terms for the founder which is why being flexible about how a deal is structured leads to better exits.