Sales Of Small Businesses To Spike, Driven By Tax Reform

New analysis from the International Business Brokers Association (IBBA) suggests small business (SMB) sales will surge in the U.S. this year, driven largely by tax reform.

The IBBA, along with M&A Source and the Pepperdine Private Capital Markets Project, announced their research on Monday (Feb. 26), which found that nearly three-quarters of surveyed advisors and brokers predict sales of SMBs in the country to increase this year.

Those professionals largely attributed the trend to tax reform and the Small Business Administration’s decision to lower minimum down payments from 25 percent to 10 percent.

“Small business owners seeking to sell their business in 2018 have cause to be bullish,” said Warren Burkholder, CBI, president of advisory group NEVRG, Inc. “With the corporate tax rate dropping to 21 percent and the repatriation of overseas capital, companies will have more capital to allocate to acquisitions. Add to that heavy competition in the marketplace, which means even more companies will be pursuing smaller market transactions.”

With more sales of small businesses expected, business advisors are more optimistic than they were a year ago, the report found. Researchers highlighted advisors’ expectations for “greater deal flow, increased business exit opportunities for sellers, opportunities for growth, better closing rates and an improvement in general business conditions” as drivers of that optimism. Further, these professionals have expressed increased optimism for the overall economy.

“Global private equity funds raised $453 billion in 2017, more than any year on record,” said Craig Everett, PhD, director of the Pepperdine Private Capital Markets Project. “It’s all going to drive competition. No one is going to back down, particularly private equity buyers who need to put that cash to work and have more flexibility to pursue creative deals, such as minority investments.”

The survey also found “small, but growing” evidence of more sellers enticed by unsolicited offers, with 13 percent of entrepreneurs selling their small businesses this way.