Private bankers say the prospect of expiring U.S. tax cuts makes 2012 an opportune time for wealthy families to sell their businesses. But a host of obstacles will likely prevent a flood of deals.
Wealth managers to the rich are telling clients who are considering selling a family business, they'd better act fast. Capital gains taxes will rise to as high as 25 percent from 15 percent if Congress does not extend cuts set to expire December 31. The cuts were enacted under President George W. Bush in 2001.
Some people earning more than $200,000 a year also face a 3.8 percent Medicare surcharge on investment income.
As a further incentive to sell, companies and private-equity buyers have piles of cash and financing for deals is widely available, investment bankers say, driving valuations for some sectors to their highest since 2008.
But owners starting the sales process now may find there is not enough time. Others may choose to keep businesses in the family for personal reasons that outweigh the possibility of a bigger tax bill later.
"The vast majority of companies are deciding they're not going to sell," said Cascadia Capital LLC managing director Christian Schiller, who advises family-owned companies for the Seattle investment bank. "Family companies are driven by a number of legacy issues, and taxes are one of the smallest."Page 1 of 5 | Next Page