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A Time to Sell

By: George Spilka
Posted: June 7, 2011, from the June 2011 issue of GCI Magazine.

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The optimum time to sell a company should be the latter part of 2011 or 2012. This is due to a number of factors:

1. Most companies’ earnings began to show some strength during the second half of 2010. Earnings should continue to grow in 2011 and increase at an even higher rate during 2012. Furthermore, 2013 should be a very good earnings year, supported by a healthy economy. These earnings levels make it possible to realize a premium price.

2. During 2011 and 2012, the capital gains tax will remain at a reduced level of 15% compared to the prior rate of 20%. It is unlikely the 15% rate will be extended beyond December 31, 2012. This 5% tax savings on the realized gain is a significant consideration when determining the timing of a sale.

3. The cheap money, which is a by-product of the excessive credit provided by the U.S. Federal Reserve, should contribute to strong acquisition prices during this period, while still enabling the acquirer to have a solid return on invested capital.

4. As 2011 begins, the majority of banks are loosening the credit spigots. By the latter part of 2011, it is anticipated the availability of credit to be at normal levels.