Wealth Management Sector Portrait
Industry experts are seeing an increase in corporate mergers and acquisitions. “I think we will see more volume this year, and part of it is pent-up demand,” says Jim Cassel, chairman and co-founder of Cassel Salpeter & Co., a Miami investment banking firm.
Cassel says business owners who were sitting tight are starting to explore a sale, realizing it could take an average of six months to complete. Most owners, he says, are encouraged by the increased availability of bank financing for a potential buyer and aggressive competitors eager to make acquisitions.
Nationally, corporate acquirers, private equity firms and hedge funds have a lot of cash and are on the prowl for companies with strong growth potential, industry experts say. In some cases, private equity firms raised capital in five-year funds in 2007 and need to invest it by the end of 2012. Some of Florida’s small businesses — particularly in healthcare or energy — fit just what those private equity firms are looking for in an acquisition, says David Rosenberg, co-CEO at Ladenburg Thalmann & Co.
Another factor that could push an owner to sell this year, Cassel notes, is a potential change in the tax code that could raise the rate for a seller with a capital gain. “I don’t believe a 5% increase in taxes is reason to sell if your company is growing. However, if you are concerned about growth, you might want to sell this year.”
While there hasn’t been an abundance of sales yet, Cassel says, those who are testing the water are seeing healthy offers - but not overinflated ones.
Cassel says the biggest deterrent to a 2012 sale can be what to do with the proceeds. “Today, if your business is doing well, you really can’t sell it and replace your income.” For example, if a company is growing by 5% to 6% and a sale nets the seller $8 million, where can you invest the money and earn that same return? “You will get more income from the business,” he says, “than from investing the money somewhere else.