President-elect Biden has been very public about his plans to roll back President Trump’s Tax Cuts & Jobs Act of 2017 while also targeting businesses and higher income individuals. With Democrat Party control of the Executive and Legislative Branches of the Federal Government assured, odds have increased for some implementation of the Plan as illustrated:
For business owners, the Biden Plan will significantly impact the net proceeds from any “pre-Biden” versus “post-Biden” M&A transaction as illustrated:
(1) Assumes immediate Plan implementation. (2) Assumes all capital gains are long-term gains. (3) Does not include local/state taxes.
Multiple Increase Required to Neutralize Tax Impact 3.2X
(4) Average EBITDA multiple for Middle Market Transactions in 2019
• Pace of business sale transactions increasing dramatically;
• Buy-side interest increasing for high quality Sellers;
• Buyers actively seeking platform and bolt-on investments; and
• Transaction structure used to minimize COVID’s anomaly in business performance.
• Deal EBITDA multiples will adjust downward;
• Deal activity will remain elevated; and
• Deal leverage will continue to be prominent in managing Buyer returns.
Disclaimer: Article is an illustration of the potential financial impact of contemplated income tax revisions that may be considered in the future. It is provided for informational purposes only and should not be relied upon for strategic, financial or tax decisions. Ironline expressly denies any and all liability for information contained within this article. It does not purport to contain all information necessary to evaluate its impact on a specific individual or company. Contact your CPA or professional tax adviser for further information.