Board Converting News, June 14, 2021

NDP: It’s The Best Time In 20 Years To Sell Your Business BY PAUL V. REILLY

NAPCO Research/PRINTING United Alliance COVID-19 Print Business Indicators Survey tells us that in March 2021, more companies were starting to report upward trends in business activity than those reporting declines. Encouragingly, industry economists are projecting sales growth over 4 percent this year. Proposed Biden Administration Changes According to a Wall Street Journal Editorial Board opin- ion piece of April 22, “Mr. Biden will tax capital gains for taxpayers who earn more than $1 million at the person- al income tax rate, which he also wants to raise to 39.6 percent from 37 percent. Add the 3.8 percent Obamacare tax on investment, and you get to 43.4 percent. And that’s merely the federal rate. Add 13.3 percent in California and 11.85 percent in New York (plus 3.88 percent in New York City), which also tax capital gains as regular income, and you are heading toward the 60 percent rate range. “ New Direction Partners (NDP) has worked with tax ex-

After a Covid related slowdown, the M&A market is re- turning to record 2019 levels. The industry is recovering,

buyers are flexible, and the funda- mental forces that drive M&A ac- tivity are still in play. With a return to normal busi- ness conditions in sight, we are already seeing a pickup in activi- ty for mergers and acquisitions in printing and packaging in 2021. 2020 put a serious damper on

Paul Reilly

industry sales, although packaging firms generally fared better than commercial printing businesses. The latest

perts, and we estimate that a typical printing firm’s owner will realize between 20 percent and 25 percent less in after-tax proceeds from the sale of their firm. Such a tax in- crease would reduce any incentive to wait a few years to allow profits to return to pre- Covid levels. Based on these developments, those looking to exit their businesses should be accelerating their plans to market their firms for sale. Buyers Haven’t Gone Anywhere That said, owners whose print and pack- aging businesses came through the pan- demic’s first year in reasonably good shape are still well positioned to sell on acceptable terms. This is because the buyers haven’t gone anywhere, even though they may have shifted into a lower gear for the same rea- sons sellers have. They still have cash, and as they scan the print and packaging seg- ments for opportunities, their motivations remain high. There are two kinds of buyers: strategic and financial. Those in the first group are mostly print and packaging firms looking to acquire other print and packaging firms for strategic reasons. These could include bring- ing in new volumes of business in the form of acquired accounts when organic growth has stalled; expanding into new geographical territories; and adding technologies, prod- ucts, and services that the acquiring firm does not have. Financial buyers are investors – finan- ciers seeking a return on their investments in sectors where they see that prospects for growth are good. Using both borrowed mon- ey and private capital, they seek out solidly

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June 14, 2021

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