"A number of favorable conditions are in place today that will benefit owners of A/E firms contemplating a sale," says Steve Gido, CFA, a principal with ZweigWhite who specializes in merger and acquisition financial advisory services. "In fact, the environment is so advantageous that owners who already implemented a formal ownership transition plan would be wise to keep their options open to maximize shareholder value. Despite the first wave of baby boomers turning 60 this year, we are seeing more firms led by owners in their 40s decide that now is the right time to sell and join forces with a larger strategic parent."
Gido offers the following factors to consider when making the decision to sell your firm:
Buyers continue to shop-There are plenty of buyers shopping for a sale. Given the challenging recruiting environment, A/E leaders are increasingly finding it more efficient to buy rather than build (or incrementally hire) as a means of strategic growth. Have your firm appraised by professionals who know what drives value in the A/E industry, or at least have a realistic understanding of what buyers are willing to pay.
Favorable tax rates-Federal capital gains rates are currently at 15 percent, an all-time low, advantageous for shareholders who sell in a stock transaction. These owners would receive their fair market value as a gain over their original basis as capital-gains treatment. While taxes shouldn’t necessarily drive the decision to sell your firm, it can be a motivating factor, so seek professional advice from a tax accountant.
Challenging internal transition options-Is your firm unaffordable to the next generation, or requiring you to accept a buyout over a 10-year time horizon? Do ESOP costs outweigh the benefits at this stage of your firm’s lifecycle? Has the firm’s ownership model not kept up with the firm’s ability to adequately capitalize the firm and position it to grow? While selling a firm can be risky, the risk of "staying the course" with any of the scenarios above can be much more detrimental to the long-term health and viability of your firm.
Gido will be presenting the keynote session, "Deal or No Deal: An Overview of M&A Activity in the AEC Industry," at the ZweigWhite 2006 AEC Mergers & Acquisitions Summit, Dec. 7-8, 2006, in Palm Springs, Calif. More information is available online at http://events.zweigwhite.com/mergers .