Owners continue to face unprecedented uncertainty in the wake of the global pandemic, increased regulatory oversight, uncertain global markets, rising inflation and interest rates, and a corporate climate that must find ways to thrive in spite of massive supply shortages. It’s natural for sellers to consider scaling back their M&A plans, concerned that a future date where things are less uncertain might offer greater promise for a more lucrative sale.

Now is actually a lower risk time to sell than any future date, and here’s why: We do not and cannot know what the future holds in terms of valuation, interest rates, regulatory environment, and more. But we do know what’s happening in the M&A market right now. Armed with this knowledge and the right M&A advisory firm, owners can tailor their M&A strategy to the realities of today, rather than reacting in a defensive posture to an uncertain future. The unique challenges of today’s market virtually guarantee that the risks of selling will increase in the next few years. Here’s what owners must consider.

Mitigating Risk by Selling Now

Valuations continue to be high, with large multiples that enable high sale prices. This won’t last forever, and rising interest rates and inflation are a strong counterweight. If inflation rates continue to increase, today’s sale price will be worth less in a year. If interest rates increase along with inflation, funding will be harder to attain, and the same business will cost more but potentially be worth less thanks to inflation. That means fewer interested buyers.

With historically high multiples in play now, the best bet to get ahead of rises in inflation and interest is to sell now. Even for sellers who manage to increase their multiple between now and the next year or so, rising inflation will likely undo that increase. Factor in an uncertain regulatory environment and changing political winds, and it becomes clear that now offers the greatest possible certainty to both sellers and buyers.

An Exception to the Rule: When to Delay a Sale

There is one notable exception to the above rule. Sellers whose businesses are in a true state of chaos should consider delaying a sale if, and only if, working on getting the business under control is likely to generate significant value. A poorly run business with significant profit potential and strong opportunities for recurring income may be more valuable in a year than today. This exception only proves the rule, though.

Even for businesses that are not performing optimally, now is likely going to be a safer time to sell unless the company needs to make radical transitions that will generate significant extra value.

Owners need a skilled advisory team to help them assess how realistic it is to generate additional value in the coming years. No matter when a company sells, the right advisors lend crtdibility to the process, potentially generating more value and ensuring a successful ownership transition.

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