The Keystone Q1 2010 - Increasing Tax Rates

Rising valuations coupled with a fear of significant increases in capital gains tax rates spurred additional merger and acquisition (M&A) activity in 2007 and 2008.  According to Capital IQ, at the peak of the AEC market (the twelve months ended September 30, 2008), there were 73 domestic M&A transactions announced in the “engineering services” industry.  With the failure of Lehman Brothers in September 2008 and the subsequent collapse of the credit markets, the US quickly found itself in a severe recession.  The lack of financing combined with weaker operating performance drove valuations down to levels that reduced M&A activity significantly.  During the trough of the market (the twelve months ended September 30, 2009), there were only 41 M&A transactions announced in the US AEC industry, a decline of 43.8% from the peak.

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In a move to further its West Coast presence, Chartwell Capital Solutions is excited to announce the addition of Pamela Steverango who will lead the firm’s new San Francisco office. Pamela, the former President and owner of Valuation Analysts, Inc., will expand Chartwell’s investment banking, ownership transition consulting and business valuation services to the west coast region, effective January 1, 2010.

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In 1999, Norm Wenck, the founder and CEO of Wenck Associates, Inc. (“Wenck”, or the “Company”) was faced with the dual task of planning for his leadership succession as well as the ownership transition of the Company.

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Private Equity firms face difficult decisions when deciding to invest in or acquire a private business. When going to market, firms typically position themselves in the most favorable light, and their owners are understandably optimistic about the future of their business.

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Located in Boise, Idaho, Biomark provides radio frequency identification (“RFID”) or Passive Integrated Transponder (“PIT”) tag products and related services to the fish, wildlife and livestock markets. PIT tags are used in the tagging of fish for identification by biologists and governments mainly in environmental programs and studies.

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According to the U.S. Census Bureau, there are approximately 1.2 million privately owned businesses in America with 10 or more employees. Fueled by the aging of the baby boom generation, it is estimated 40% to 60% of these businesses will change hands over the next decade.

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Valuation Theory. First, a bit of theory. The value of a business is dependent upon internal company factors, as well as external market factors that are beyond the control of an individual business.

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Ownership Transition Insight: Focus on Family Transfers

As business owners near the exit point for their investment, they are faced with alternatives which may include the sale of the business to third parties, management or their employees, or they may desire to have family members assume an ownership role in the business.

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Expect the unexpected. A well-planned exit strategy can help owners extract cash from their businesses, addressing a variety of transfer scenarios. These may include voluntary transfers such as retirement, gifts to family members, donations to charities, stock compensation plans for managers, or mergers or acquisitions.

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