Family Business Director

April 1, 2024 M&A Planning & Strategy

Home Depot Announces SRS Distribution Acquisition

An M&A Case Study

The Fed’s efforts to rein in inflation from early 2022 through the middle of 2023 also reined in middle market M&A activity.  Middle market transaction data provider GF Data reported data on 269 sub-$500 million acquisitions by private equity firms in 2023, compared to 464 such deals in 2021 (a 42% decrease).  Some of those “missing” deals may never happen, but we suspect most were simply deferred, leading to more robust transaction volumes as buyers and sellers acclimate to the new “normal” interest rate environment.

Home Depot’s recent announcement that it was acquiring roofing and construction material distributor SRS Distribution may signal the return of more robust deal activity.  Even if your family business has nothing to do with construction materials, there is plenty to note in this deal.

March 26, 2024 M&A Planning & Strategy Valuation

Your Family Business Will Transact: Are You Ready?

Approximately 75% of business owners regret selling their business within the first year following the sale, according to a new report. Have you checked in on your succession plan? How does your business’s succession and exit plan stack up? We explore a new report and why planning ahead is crucial to ensuring your future business transition goes as smoothly as possible.

March 18, 2024 Planning & Strategy Special Topics Taxes

Now Could Be a Great Time to Transfer Stock to Heirs

Rising inflation and higher interest rates have significantly affected business values and the broader economy, with some industries managing to navigate the higher-rate environment while others struggle. The Federal Reserve has indicated potential rate cuts later this year, which could have widespread implications for businesses and the economy. Now is the time to explore favorable opportunities for transferring business value to future generations and consult with estate planning advisors.

March 11, 2024 M&A Planning & Strategy Special Topics

5 Reasons Sellers Need a Quality of Earnings Report

In a recovering M&A market, sellers must be prepared to present their value proposition effectively. A Quality of Earnings (QofE) report is essential for sellers to maximize their asset’s value and navigate the negotiation process with confidence. The report not only helps in presenting adjusted and future sustainable profitability but also equips sellers with crucial information for clear decision-making, fostering transparency, and ensuring a favorable transaction outcome.

March 5, 2024 Planning & Strategy Taxes

The Times They Are A-Changin’

The sunsetting provisions of the Tax Cuts and Jobs Act (TCJA) are set to expire after 2025. Family business directors must be aware of these changes, especially the Qualified Business Income (QBI) deduction and federal gift and estate tax exemption amounts. Expiration of the QBI deduction would increase taxes for pass-through entities, while the reduction of estate tax exemptions would significantly impact family wealth planning. Proactive planning and consultation with tax professionals are essential to ensure the continued success of family businesses.

February 26, 2024 Capital Budgeting Planning & Strategy Taxes

Capital Planning and IRS Section 6166

Successful enterprising families are careful and deliberate consumers of family capital. In specific circumstances, Section 6166 of the Internal Revenue Code can provide a capital planning alternative family business directors should consider when facing large contingent liabilities for shareholder estate tax obligations.

February 20, 2024 M&A Planning & Strategy

Ownership Succession and the NFL

The NFL has functioned as a family business incubator of sorts throughout its decades of existence. While other major U.S. professional sports leagues have embraced private equity ownership in recent years, the NFL has held out in favor of the family-owned model. The introduction of private equity into the league (expected at next month’s league meetings) will have far-reaching effects, both positive and negative. In this week’s post, we look at the pros and cons of private equity ownership in NFL franchises and how, like the NFL, family business owners considering private equity investment should weigh the pros and the cons before bringing PE firms into ownership groups.

February 12, 2024 Capital Structure Planning & Strategy

Viva Diversification: The Vegas Transformation and Your Family Business

Las Vegas has transformed from the gambling-centric “Sin City” to a luxury entertainment destination. As the city’s revenue model shifted from primarily gaming to encompass live shows, fine dining, and global sporting events, it reflects a successful adaptation to changing market dynamics and consumer preferences. Vegas’ transformation is a compelling case study for family businesses considering diversification strategies, and provides a good example of strategic planning and investment in a future that honors past successes while exploring new opportunities.

February 7, 2024 Planning & Strategy Special Topics Valuation

A Matter of Life (Insurance) and Death

Life Insurance as a Funding Mechanism for Shareholder Buyouts

In the case of Connelly v. United States, a family-owned roofing and siding materials company, Crown C Supply Company, Inc., faces a complex legal and financial challenge following the death of one of its major shareholders. The dispute centers on whether life insurance proceeds should be included in the company’s equity value for buyout purposes, a decision with significant implications for the valuation of shares and the financial future of the company. This case, now headed to the Supreme Court, highlights the critical importance of clear buy-sell agreements and the role of life insurance in shareholder buyouts, offering essential insights for family businesses navigating similar transitions.

January 29, 2024 M&A Planning & Strategy Special Topics

5 Reasons Buyers Need a Quality of Earnings Report

In 2024, as the prospect of Fed rate cuts begins to attract buyers back into the market after a period of caution in 2022 and 2023, the importance of thorough due diligence cannot be overstated. Family businesses, in particular, should pay close attention to the crucial role that a Quality of Earnings (“QofE”) report can play in their acquisition decisions. From uncovering sustainable earnings and identifying cost-saving potentials to understanding revenue synergies and assessing capital needs, a comprehensive QofE report emerges as an indispensable tool for family business directors aiming to navigate the complexities of acquisitions with confidence and strategic insight.