ASI has been serving the small and mid-size M&A market for over 25 years. In the vast majority of transactions, we represent the sellers, but occasionally we represent a buyer who is conducting a targeted search for an acquisition candidate. For business owners, the decision to sell is never easy, particularly if the owners have invested years, if not decades, in building up the business. And in most cases, the business represents a substantial portion of the owners' personal net worth, so the use of an experienced intermediary is critical to maximizing value from a sale or merger.

The Best Time to Sell

As a business owner considering selling your business, you have two choices. First, you can continue to work hard to grow the size and profitability of the business, hoping to sell it for more in several years. Or you could sell it now when market conditions are relatively stable.

So why should you consider selling now? Here are some of the most common reasons:

Market valuations have improved considerably since the aftermath of 9/11.
Capital gains tax rates are the lowest in history but may increase in the future.
Both interest rates and foreign exchange rates are at very attractive historical levels.
After a long and successful career in your business, you are finally ready to retire.
Your market has changed so severely that your company's best chance of future success is by combining with another company to achieve the benefits of increased size and financial strength.

If you are considering selling your business but are concerned about optimizing the timing of the sale, keep in mind that a typical transaction requires 6 - 12 months to complete. Delaying a decision to sell means that you are taking a risk regarding future economic and market conditions, including interest rates and capital gains tax rates. The best time to sell is when business conditions are stable or improving, thereby leaving several good years in a business cycle to the new owner. This creates a win/win situation for both you and the buyer.

On the other hand, if you wait until too late in a business cycle, your selling price will be lower, with the increased risk that your buyer may fail. Since most transactions involve some seller financing in the form of notes, consulting agreements or a covenant not to compete, your future payment stream may be jeopardized. Therefore, if you are planning to sell your business, act while business is good, not when business is declining.