News & Events
Trumps Probable Impact On Business Brokerage
ENLIGN DEAL TEAM | 11/21/2016
At least as I see it… Whether you voted for or against him (hopefully you voted) odds are that a Trump presidency will have a material impact on your checking account. After everyone from world leaders to actors and actresses denounced him, since the election Russia’s and Syria’s Presidents have called for “renewed relations”.
The mouthy actors and actresses haven’t moved to Canada (save one who I think is actually going to Italy) – anyway, the point is now that he’s in office the big talkers aren’t walking the walk – they are getting in line.
Let’s look at the various ways the Trump Presidency might impact our lives as business brokers.
First, if all goes well, HR 686 - S 1010 will pass and intermediaries will be permitted to receive commissions on non-publicly held stock transactions without FINRA licensure. No more crossing your fingers that the attorney doesn’t know the law regarding stock sales. There are of course defined limitations and once passed you are encouraged to read and understand what you may and may not be permitted to do in such situations.
I suspect IBBA will have a webinar and subsequent conference panel or workshop to further clarify as well. These will be 'must attend' events.
Second, now that the election is over and votes are counted (with some exceptions like the Governor’s race in my home state of North Carolina) most business buyers and sellers have a renewed sense of confidence regarding proposed business purchases and sales.
They generally believe that the rate of State and Federal regulations will not continue to rise and that in time many regulations may even be abated making it less expensive and less administratively burdensome to conduct business.
I believe this will lead to more buyer interest especially in the under $1 million owner benefit range. I also believe this will lead to reduced seller interest thus moving the supply demand curve in favor of sellers. If the future looks brighter to a business owner than it has in the past 8 years why sell now? If my logic holds true, multiples will go up perhaps even to pre-recession levels or higher. Again, I think this will be most pronounced in the main street market.
Third, a Trump administration isn’t likely to support a $15 minimum wage (or any increase in the short-term).
This means employers – especially on main-street are less concerned about wages digging into their bottom lines. Contrary to business owners bottom line is the potential shift towards a consumption tax that would have an adverse impact on small business retailers as consumers pay more sales taxes.
Forth, The “Affordable” Healthcare Act or Obamacare. I was on the cover of the New York Times above the fold on July 30th, 2009 with President Obama.
Look it up: https://www.nytimes.com/store/front-page-new-york-times-reprint-nskeep.html You'll need to enter the date. That’s me, Jeff Snell, on the left in the brown suit after he spoke at length about all the benefits of his new healthcare plan.
He promised that healthcare costs would go down on average by $2,500 per household. Since then my household would pay 200% more, but we raised our deductible to $10,000 per year to lower our premiums just in time for my wife to be diagnosed with stage 3 cancer.
$30,000 later in deductibles she’s fine.
Lesson: Deductibles are per YEAR not per diagnoses/treatment. So how does this relate to this article you ask? Good question. One of the most high profile campaign topics was understandably healthcare costs.
I believe the Trump administration will act quickly to walk back the complicated, expensive and inefficient system and replace it with something that is at least as good as the country had before while lowering the cost of healthcare for business owners (again – increasing buyer demand while lowering seller supply) and families allowing for more discretionary spending and saving.
Fifth, the perception is that business and personal taxes will go down. This supports the more buyer/less seller transaction interest as every dollar not due in taxes goes 100% to owner benefit.
Lower business and personal taxes also mean that the commissions you earn on that large stock transaction that was completed at a higher multiple due to the supply demand shift with higher owner benefit/EBITDA due to reduced taxes and healthcare costs will be taxed at a lower rate.
Be sure to use some of that money to invest in yourself with continuing education and CBI licensing with IBBA and make that donation (or another) that you’ve been planning on to BIEF (http://www.biefoundation.org/contribute-bief/) that will have gotten the federal law changed to a common sense approach on stock sale commissions for all of our benefit.
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