Key Impacts Of Selling Your Business During An Election Year

The upcoming 2024 Presidential election brings significant uncertainty for business owners, as each political party's proposed policies can affect the broader economy and market regulations. This makes it crucial for business owners considering a sale to work with an experienced advisor who can analyze market conditions and who understands the potential impacts of a new administration. In this article, we review the key factors to consider when selling your business in 2024 and their potential impacts.

Economic Factors:

• Tax Policies: Changes in tax rates and regulations can affect the attractiveness of selling a business. For example, if a presidential candidate proposes lower capital gains taxes, business owners might delay selling until after the election. You can learn more about each candidate's proposed tax policy changes here.
• Regulatory Environment: Different administrations may have varying approaches to regulation. A business owner might wait to see if a more business-friendly administration takes office, potentially increasing the business’s value.

Market Uncertainty:

• Investor Confidence: Elections can introduce uncertainty, affecting investor confidence. During uncertain times, potential buyers might hesitate to make large financial commitments, affecting the ability to sell a business.
• Market Volatility: Stock market volatility often increases around elections, impacting the availability of capital and the valuation of businesses.

Interest Rates & Financing:

• Monetary Policy: The election outcome can influence the Federal Reserve’s policies on interest rates. Lower interest rates can make borrowing cheaper, potentially increasing the pool of buyers able to finance a business purchase.
• Access to Credit: Different administrations might have policies that affect the ease with which businesses and buyers can access credit, influencing the sale process.

Sector-Specific Impacts:

• Industry Regulations: Certain industries might be more affected by election outcomes due to specific regulatory changes. For example, healthcare, energy, and finance sectors often see significant policy shifts.
• Government Contracts: Businesses that rely on government contracts might be directly impacted by changes in administration priorities and spending.

Buyer Behavior

• Strategic Decisions: Potential buyers might delay acquisition decisions until after an election to better understand the new political landscape and its implications.
• Valuation Adjustments: Buyers might adjust their valuation models based on anticipated changes in the economic environment, affecting the terms and price of the business sale.

Psychological Factors:

• Confidence in Stability: The overall perception of political stability and future economic policy can affect the willingness of both buyers and sellers to engage in transactions.
• Timing of Sale: Business owners might try to time the sale to align with a more favorable political climate or to avoid potential negative impacts from an incoming administration’s policies.

Legislative Changes:

Future Legislation: Anticipation of new laws affecting businesses, such as changes in labor laws, environmental regulations, or trade policies, can impact the decision to sell and the terms of the sale.

Despite the uncertainty, proactive business leaders who pursue acquisitions, divestitures, joint ventures, and minority investments can gain strategic advantages and access new revenue sources. While higher capital costs can present a challenge, moving forward with comprehensive due diligence and risk assessment is essential for achieving both short and long-term business goals in this unpredictable environment.

Business owners contemplating a sale around a presidential election should closely monitor the political landscape, understand potential policy changes, and consider consulting with a seasoned M&A advisor, like those at Final Ascent, to navigate the complexities introduced by the election cycle.

The M&A professionals at Final Ascent can help you better understand the effects of the upcoming election on the sale of your company. Contact us today at www.finalascent.com!