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On-Demand: Wealth Management Economic Impact Webinar Series | Business Succession and the Markets | When Is It the Right Time to Exit?

Mar 16, 2023

In this webinar, we discussed how to craft a successful business succession plan, mentally and financially prepare for your exit, and maximize tax and financial benefits for your family.

Wealth Management Economic Impact Webinar Series


Onofrio Cirianni:My name's Onofrio Cirianni, just by a quick way of background. I want to welcome everyone in today's webinar. I'm here with my partner, Hal Michaels. I'm a financial advisor. I've been in the industry for 35 years. I've specialized pretty much from the early years working with closely held business owners, mostly family businesses.

I've been here at EisnerAmper Wealth Management for 22 years and I am a certified business exit consultant. I'll ask Hal to give us a little bit of his background before I get into the content.

Hal Michels:Thank you Onofrio. Good afternoon everyone. I'm Hal Michaels, I am a partner at Eisner Advisory Group. I am also a wealth advisor at EisnerAmper Wealth Management. I've spent my entire career, which unfortunately is going beyond 40 years, servicing closely held businesses, both family, non-family, and I have my Emerson taxation and looking forward to sharing my thoughts and experiences with me today.

Onofrio Cirianni:Thanks Hal.

So it takes years, sometimes decades to start a business, grow a business, and you may only have one opportunity to exit whatever that exit may be. So our hope today is touching on some concepts, sharing some ideas, practical advice that you can take regardless of whatever stage you are in your business. We have an abundance of experience just between how and myself and the resources within EisnerAmper and organizations that we both belong to that specialize in this space. We have a pretty broad audience. There are people here that probably are just setting up a company. There may be those that are in the growth stage and then there's others that want to get out of the business maybe yesterday and are ready for some form of exit or transition.

We're going to make some comments and again, a lot of these are going to be general and we'll try to break them down so that you can identify with some of the comments and some of the tools that we'll share with you where you fall in regards to whether it be your industry or as well as the size of your business. So just a brief overview of what we're going to cover is why have a succession plan? What does that mean?

We'll get into some basic steps to create an optimal transition plan. We're going to talk a lot about not just financial readiness, but you'll hear throughout our presentation comments on getting mentally ready before, during, and after a transition. Valuation methods, why do you have valuation methods? What's the purpose? Hal's going to dive deeper into buy sell agreements. What are they? Why should you have one? And then we'll talk about when is the right time to exit and giving you some recent data in regards to market conditions and how that may affect you and your business. And then as always, what are the tax considerations in advance that you can plan for to make it as most tax efficient as possible for you and all parties involved? And then we'll kind of wrap it up.

Astrid Garcia:Polling Question #2.

Onofrio Cirianni:Thank you.

So why have a succession plan? There's a lot of activity that's happening and part of it has to do with demographics. So as an example, in 2021 there were 32.5 million small businesses under 500 employees and more than half of them have owners that are above age 55. So this is do in part a lot because of the baby boomers looking at maybe that next stage of their life more than a third of them plan to fund their retirement or a portion of it by the actual liquidity event or selling of the business. And more than half of them don't have a buyer lined up at that point in time.

And the overwhelming majority, and we could definitely see this in our day-to-day practice, almost 80% don't have an actual written plan. There may be some concepts and ideas and discussions along the way with advisors but not a real formal plan. So what do we see in terms of owner mindset? I would say most business owners are really good at what they do, developing great businesses that build value, that generate income, that provide products and services to attract many happy customers. But like many businesses, you get caught up working in the business versus actually working on the business. So we always are reminding our clients and those who we meet with to take a step back and pause so that we're always concentrating on throughout the process wherever they are in their stage of their business, is to look at the business and have an end game. We always say begin with the end in mind regardless of whatever stage you are in the business.

95% based on some studies, I'm a member of the International Association of Exit Planners. It's a great think tank made up of exit planners and advisors from all different disciplines and we're constantly doing studies which I'll share throughout our presentation today is most business owners are focusing on the growth and we refer to the segment wall and we refer to other items such as value drivers. So there's a lot of different elements of the business that are going to increase value. These value drivers actually are measurable. It's almost taken like a stress test of the business.

There's 20 to 25 different value drivers and we'll touch on some of those today to identify basically your strengths, weaknesses and opportunities. Again, not just to grow the business, but ultimately what's going to give you the most value, which ties into short term versus long term. And I think this is what keeps a lot of business owners up at night is valuation, the day-to-day challenges. We've seen a lot of new day-to-day challenges over the last three years as a result of COVID and shutdowns and different economic impact in the changing workforce. So what are some of the valuation and exit issues? Cash flow, again, cash flows king typically looking at how to increase revenue independent of increasing value. Those may not always be parallel. Transparency in the business operations investment, is that investment going to increase sales for the next two to three years or is it going to increase value for the long term when there's an ultimate exit.

Interest financing. Again, we'll touch on that with the spike up and interest rates over the last year and how that's impacting. We'll share some data with you and also looking at different areas of risk. And risk is broad in many senses and we refer to the octopus owner, how many things do does the business owner, if there's more than one owner touch every day, are they heavily involved at the high level or are they getting heavily involved in, I'm going to say more in the micro level. So one of the concepts we refer to as owner dependency, can the business operate without the owner? And what we've seen with many transactions and valuation methods is the business that can operate without the owner typically has the most value, the least amount of risk, and hopefully it really benefits all parties, the owner themselves, where they've already started separating from the business in many respects and having a smooth transition personally for the next stage of their life.

So just some examples in terms of the octopus owner, there's many elements within the business and one of the things going through a process with businesses again, which can take years or decades up to the ultimate exit, is looking at what's the unique ability of the business owner? What is the owner really, really good at? And again, this'll be affected by the size of the business as well and the industry.

And if we can start over time looking at those core values, those elements of the business here that the owner can actually delegate and give up control and give some others ownership within the business, key people within the organization that may stick around most likely when the business owner actually exits. I would say one area here that we find maybe the most common is the typical entrepreneur is really good in sales and business development, generating revenue, building those relationships that may have started small but has grown across maybe the entire business enterprise and we try to look at the business owner and try to shift from being maybe that chief sales officer to the chief executive officer and again, that #takes preparation, planning and definitely some time.

So just some statistics from the owner dependence index. Again, this is a tool where business owners can actually input a lot of data about themselves and their business and historically over half of the business is really dependent on the owner. So I go back to that octopus owner. More than half of those essential elements and core values of the business is really controlled by the business owner and maybe not delegated to others. So again, going through some of these exercises which we can share with you, you can see this has been pretty consistent in terms of this study. I've seen this study probably for the last five or six years in a row and the needle really has been somewhere around the 50 to 55% range.

We also have to look at the size and complexity of the business. Having a conversation, looking at your own business if you're just one owner versus multiple owners versus maybe dozens of owners with investors is a whole different conversation and there's going to be concentration on whether there's going to be continuation of management if you're a one owner, I'm going to say that is a common element and maybe even more so over the course of the last six to 12 months with the changing market conditions where buyers are looking for continuity with management and having that transferrable transfer of relationships and understanding the business.

So the approach for business planning and business succession and exit planning as it gets more complex as we move up the ranks and there's multiple owners is having a foundation and certain documents in place like an operating agreement and essential elements in a buy sell agreement because now it's just not one individual. It may involve multiple individuals, some of which may be related if it's a family business or you might have investors versus getting to the high complex business maybe into the middle or upper end of the middle market where the shift is more to employees management as well as personal planning and what that means to the business owner themselves.

So there's three stages of planning. First being protect the business and we like to start off with this to look at what are the elements of risk and that protection could be everything from liability risk, which we'll touch on structure of your business, what type of entity you are, how is the business insured, what if the owner dies prematurely, becomes disabled, lawsuits, et cetera and so on. Cyber happens to be a big one that we're seeing really across all industries, small, medium and large growth in the business. What are some of those core values, some of those core elements of the business and where are their weaknesses? Do you have a high concentration of customer, just a few customers or is your revenue really spread out where losing one or two customers is really not going to impact the top line or the bottom line?

There are a lot of consultants in this space, not just internally within our group or EisnerAmper, there's a lot of industry niche specialists in this area that can identify where you are as far as your core value and where there's opportunities for improvement and then how will you exit the business. It's a much different approach if you are going to keep the business within the family. If it's a closely held family business, that's probably going to focus a lot more on estate planning and wealth transfer techniques. So that generation number one who exits has a nice sunset into retirement, can still live a nice lifestyle and is not risking that into the future.

At the same token, focusing on how's that next generation going to step in, what does it mean to them from a tax standpoint, from a structural standpoint as well versus a business owner that may want to grow the business and sell to a professional buyer like private equity, it's a whole different conversation and needs all sorts of planning in advance. Your buyers are going to be real pros and professionals here. So we always refer to building a planning team and a deal team when you're sitting across folks that do this every day or you may even have an exit where your key people or your employees might buy the business, whether it be management or through an ESOP. Again, lot of different paths, it's almost like going through a process of elimination over time to determine which one is most appropriate for you.

So we refer to the doors of expertise around here a lot helping clients live the life they want to live. There is not going to be one professional that's going to be able to help you with all facets in preparation of protecting, growing and exiting or transitioning your business. It will take a team of professionals. Again, we refer to it as a planning team and it may actually transition more into a deal team where different expertise may come into play depending on the ultimate exit plan and things in terms of background and disciplines, whether it be a CPA, an attorney, a mergers and acquisition type specialist, an exit planner, a financial advisor, financial planner, insurance professionals, again, depending on the size, complexity and stage in the business, generally speaking, it takes collaboration amongst all really to get the optimal plan and exit on your terms.

So one big question that comes out typically revolves around is a business owner financially ready. I'm going to oversimplify this a little bit for our discussion today. We refer to is the money enough in terms of how much assets you have versus how much assets you'll get in terms of a sale by adding the two, is that enough capital to support your lifestyle for the rest of your life, net after tax and fees of selling your business or transitioning the business. If it's not enough we refer to that as the value gap and I think a lot of folks focus on the financial aspect the most, but there's been dozens of studies done over the last 15 years, thousands of business owners involved in these studies over time where it's measuring not just their financial readiness but are they mentally prepared. So there's an exercise called the business exit readiness index.

You answer like 25 questions, we'd be glad to share this with you. It's for free and it generates like a nice report. It's not a solution based exercise. It's really a good exercise to kind of look at how you're answering these questions. There's some behavioral finance and science behind it and it gives you an output based on how you answer those questions of what category you might fall into at this point in time. And generally speaking, I will say that most people, even if they're financially ready, the overwhelming majority of the results weigh towards most business owners are not mentally ready. So they may have the value of a business that they can sell and leave tomorrow, but they're not prepared to, whether it be relationships, what does the next stage of life look like, et cetera and so on. Different dynamics that come into play here. It's actually an excellent way to maybe start the process.

When we look at having an optimal transition, we look at basically five steps. First and foremost is determining the business owner or owners', personal and professional long-term goals and objectives. It starts there. That's the foundation and it's not mentioned, but I'll add if there's a spouse, significant other or a partner in the business owner's life, they should be equally involved in this initial discussion is really to understand what is really important to you as a couple, as a family and what do you want to accomplish down the road.

It will definitely create the foundation getting into the business aspects. We then get into financial requirements. What is the value gap if there is one in achieving that transition? Is it going to be enough? Are you going to be confident living a long life and enjoying it? Identifying and developing a management team key, it can't be just that octopus owner, business owner by themselves. It's having a deeper bench and a business that can run post-sale or post-transition. Determining what path you want to go down, what kind of transition you will be, who will be the ultimate owner. And as always is efficiency, minimizing taxes, preparing an estate plan, those definitely intersect. I'm going to pass it on to my partner Hal and he'll pick it up from here.

Hal Michels:Yeah. So who will buy an interest in your closely held business? Onofrio mentioned all these entities or people, the partner, business entity itself, key employees and family members. They're all internal as opposed to the third party buyer. And as Onofrio mentioned with the third party buyer, that's where you're going to bring your deal team in. You're going to negotiate. Market conditions will really reflect what comes out of it. As in terms of the other entities they're internal that you're going to have to determine the value, the terms, the funding with either your partners or your key employees and that's where we kind of move to the buy-sell agreement and basically there are two main types of agreements that apply to closely held businesses. You have your governance agreement, which could be a shareholders agreement, a partner agreement, a member's agreement depending on the type of entity in which we're dealing with.

That sets forth the governance of the organization. And then you have your buy sell agreement which really deals with liquidity events, sets the valuation, sets the terms, sets the conditions, sets the funding. Oftentimes the buy-sell agreement is part of a shareholder's agreement. It could be a separate document as well. I have no particular preference in that regard. Usually the attorneys will determine whether or not it's one agreement or two. And the liquidity events and we'll get to a little bit further on are retirement, disability, death and potential buy-in by either a key employee or additional acquisition of current members.

The buy-sell agreement is referred to in the last stages as the buyer's will, it'll establish value, it'll establish how money is to be made available for purposes of the buyout and it does reduce conflict upfront. Absent of buy sell agreement, absent of governance agreement if there is an unfortunate event, that's when turmoil results. So if you take the time and create a well thought out governance agreement and buy-sell agreement, it takes all those stresses away when retirement occurs as you get closer to retirement, when a key employee needs to be brought in and given a piece of the equity. These are all essential pieces of the agreements and like I said before, the shareholders agreement or the governance agreement and the buy-sell agreements work hand in hand.

Sorry about that. Transfer restrictions as referred to are usually you'll see in the governance agreement. Typically they're not in the buy-sell agreement. As I said before, the governance agreement really dictates how the organization run and how the shareholders interact and you'll see restrictions and conditions set forth in the governance agreement, not particularly in the buy sell agreement.

The advantages to owners in my experience, there are many challenges that exist with closely held businesses that are separate and apart from the operation of the business. Well thought out shareholders agreements, buy-sell agreements really provide for a footprint of how the business is going to go forward, both from a succession point of view, from a management point of view, it creates stability and allows for an owner to understand where his future is going to be and more importantly how the next generation is going to interact and progress, whether that be family, children, grandchildren or key employees.

Again, we talked about liquidity events that are going to be governed by the buy-sell agreement. To the right of your screen you'll see it refers to voluntary and they're really not going to be governed by your buy-sell agreement. They're really third party type of situations that really are negotiated. The key issues in your buy-sell agreement is going to be death, disability, retirement. They're all unique in how they're going dealt with. Death is probably the easiest to deal with. It's there's a certainty with it. It can be funded by insurance and I happen to come from a partnership where we had good buy sell agreements and we funded them with life insurance and unfortunately we had a partner pass away, but fortunately we had insurance, his estate, his family were taking care of him and we were able to move forward with our business.

Disability is probably the most difficult liquidity event to deal with and that's because you have to define it, which is sometimes not easy and insurance is very expensive, not as easy to get as with life insurance. Retirement is a combination of the two. You need liquidity, you need cash flow or you need to be able to have funded for that over the life of the business. The other events, termination without cause, deadlock, divorce, resignation with good reason, change of control are typically defined in the shareholder's agreement and not usually addressed in the buy-sell agreement

As we spoke, key employees are oftentimes the next generation. There may not be family and in my experience I've had a lot of entrepreneurs who have started a business and really made a lot of money while they were conducting the business and they were really more concerned with the legacy of the business going forward and spent a lot of time with management with key employees with that mind. They're not necessarily interested in maximizing their value on the way out. And so in that situation, the buy sell agreement may provide for discounted values, may be based on book value, may provide favorable terms to the employee committee, may provide bank loans that the business guarantees, but what really is driving that mentality is legacy as opposed to optimization of value.

Astrid Garcia:Polling Question #3.

Hal Michels: Valuation is a key element obviously of the buy-sell agreement and it's fluid and as I mentioned previously, it depends on whether or not owners want to maximize their value, which goes to what Onofrio spoke about a little bit earlier. Is there a valuation gap or whether or not it's legacy is the prime motive of the owners and valuation is in the eyes of the beholder, especially when it's internal. My preference is to meet with my clients and to review the valuation that's in the buy-sell agreement on an annual basis. Typically, I'd like to come up with a formula or some concept which we're going to implement and then be able to utilize that every year to update the buy update, the buy-sell agreement. Sometimes we change the value, sometimes we leave it as it is. But what's important, it is a motivator to have an annual meeting to review the financial statements and to understand and reflect on whether or not the valuation that's in the agreement is appropriate, whether there's a need for more life insurance, whether there's a need to change in our condition of the business.

As I stated before, there are many different ways to value a business. As I said, I find coming up with a formula that makes sense that we can apply on an annual basis is the most realistic, most flexible method to use it. It's certainly less expensive than getting an appraisal every year or every so often. Although if it's a family owned business and there's gifting involved, there's going to be a need for appraisals. When they're independent unrelated parties, the IRS will accept valuations. But again, if there's gifting, if it's family involved, then in order to legitimize that valuation there's going to be a need for appraisals.

There are really two types of buy-sell agreements, cross purchase and redemption agreement or an entity purchase. An entity purchase or redemption agreement is just that, the entity acquires the interest of the owners. It's simple and as opposed to a cross purchase, which is where the owners agreed to buy each other's and sell each other's shares. More complicated, especially if there's more than two owners. However, the tax benefits to a cross purchase agreement are significant.

The acquirer of the shares gets a stepped up in their tax basis, which depending on the underlying assets in the business may be able to be depreciated or amortized on a current basis. And oftentimes we'll use an escrow agent or trustee when they're multiple owners to facilitate the exchanging of shares, the reissuing with shares and the collection and disbursement of money. But my preference is certainly cross purchase agreement cause the tax benefits are significant. Again, we touched a lot lot on this and where we mentioned life insurance. Again, if we use a trustee, if we use an escrow agent, if the escrow agent collects the proceeds or the death benefit and distributes them according to the shareholder's agreement and/or the buy sell agreement. Here's a comparison I articulated. Again, the entity purchase is simple, but my advice and my preference is a cross purchase agreement for all those reasons.

Onofrio Cirianni:All right, thank you Hal.

Hal Michels:Okay, Onofrio.

Onofrio Cirianni:So we're going to switch gears a little bit and there's a lot of questions coming in from our viewers here in regards to market conditions. So I'm going to give you a little background in regards to what's happened over the last few years and touch on a little bit about what's happening in the last maybe week based on some recent data.

So 2021 by far was the perfect storm for owners exiting their business. And I was going to say there's three main elements. Number one COVID and depending on what industry you're in, with the rising revenue and growth of certain businesses and industries based on demand, the multiples and EBITDA calculations were very high. There was also pending tax proposals from the Biden administration and Congress, which was a big motivator in regards to capital gains treatment potentially that was going to change the net proceeds to a business sale, which ultimately ended up getting declined. And then just the overall demographics of aging boomers. There's just so many business owners that are looking for transition.

Astrid Garcia:Polling Question #4.

Onofrio Cirianni:While we're waiting-

I was going to say while we're waiting for the polling results, a lot of questions are come in, we'd like to try to address a few of them along the way with the time that we have. One of the questions was, what are some of the biggest challenges with a family business versus other businesses with transition? My experience has been, and Hal can add, is family dynamics. There's relationships involved and I always say that you want a great transition and get good results, but keeping family harmony involves patience and potentially other professionals with different skill sets at the table to help. I joke we say that we wish we took more psychology classes in addition to finance and accounting, so it was too late to go back to school to be an expert there. But we actually do have organizational psychologists as a part of our team here at EisnerAmper that help us through this process.

Astrid Garcia:  I will now be closing the polling question. Please make sure you have submitted your answer. Back to you.

Onofrio Cirianni: So what happened in the past year? There was definitely a shift, some movement in midterm elections which can impact maybe legislation, regulatory issues, the war in Ukraine, and then I would say inflation and rising interest rates a big spike after a prolonged period of a low interest rate environment. So here's a chart going back to 1950. We say pictures say a lot and there has been a pretty big spike in interest rates in the last year, which is impacting certain segments of the market. However, if you just put it into perspective, we're still relatively low to moderate in regards to where interest rates are or the cost of money in terms of raising capital, whether it be in a transaction or to grow your business.

Astrid Garcia:Polling Question #5.

Onofrio Cirianni: So I'd like to share with you a little bit of history based on actual data. It's looking at time periods where exits transitions within businesses were at peak times where there was actually recessions and there was less transition happening. And then periods where there's uncertainty. So I think the ultimate goal for most business owners is to grow their business, increase the value, and if it can get to that optimal position where you have everything prepared, almost like preparing to sell a house, everything is beautifully manicured and ready to go to sale, that it happens to be in the best market conditions as well.

As we know, that would be almost impossible for both of those to occur at the same time. So market conditions actually will impact ultimately the multiples or what the structure of that business sale may be. I would say based on just recent studies in the last few months that I think consensus is that we're kind of leaning towards that far right. It's that uncertainty. Are we in a recession? We're in a kind of strange period where inflation is going up and there's different economic pressures, but we're in a really low unemployment rate and the demand for businesses is really high, getting talent.

There's also definitely different things happening in the different segments of the market based on size and just general comment, what we're seeing in the recent, particularly with the rise in interest rates, that's affecting for the most part the middle market, and I'm going to say the upper end of the middle market. Just based on the structure of a lot of deals if they're financed with debt, whether it be senior debt or mezzanine debt, there's different levels of debt, particularly for smaller businesses, it's not as impactful as it is in that middle market.

Here's a slide just giving you a sense of what's happened in terms of size of businesses and what's happened over the last few years. This goes through the end of the third quarter and if you look at the chart, larger businesses, you can see where there was definitely a spike, which peaked in the third quarter of last year where multiples as high as 10.5. So although some of the other trends in terms of interest rates, the economy and things that were mentioned in this presentation, there's been a little bit of a flattening out or maybe even a downward trend.

The biggest change has really been in the upper end of the deal size. So timelines of selling a business, this comes up a lot with clients, especially if it's the first time they've done this. We want to make sure that there's a methodical approach and manage expectations. I think buyers want to do that and we as advisors try to guide our clients. Typically it is over a 12 month period and again, as I mentioned before, having the right planning team and deal team in place so that every stage of that sales process is met.

We definitely see some headwinds and I know a lot of questions that have been coming in about interest rate hikes and even what's happened over the last few weeks. If you look at this chart, and again, this chart was through the third quarter and there's some stats even through the fourth quarter, interest rates, economic disruption, the war, politics, they do have an impact, not a big impact. It's really at the upper end. The biggest challenges today are labor shortages, supply chains, depending on the nature of the industry getting cost of goods or raw materials.

The best businesses are selling in good markets and in bad markets. But when market conditions change, as we've seen over the last 12 months, one of the shifts that we're seeing is the structures of the deals, maybe less cash, maybe you're getting more equity where maybe owners were walking away from the business after a transaction, they're asked to stay longer. Maybe there's an earn out, which historically has always been the case. Over 80% of transactions typically ask owners to stay on board longer. But those B+ or B- rated companies, the multiples are going down and the structures of the deals are changing. And these three factors are definitely the biggest impact more so than interest rate changes.

I'm going to pass it on to Hal for the remaining part of our presentation.

Hal Michels:We don't have a lot of time left. I could spend eight hours talking about the tax considerations because it's critical, right? It's a very significant part of the economics and I've seen deals fall apart because of poor tax planning. And it starts with the entity structure. It's really important to understand what your objectives are when you choose your entity. For example, here's section 1202 in the internal revenue code is small business stock. If your business is under $50 million and you acquire your capital at issuance, it's possible to eliminate all or most of any gain. There are requirements, the entity has to be a C corp. It can't basically be a professional service organization. So we don't see it a lot. But if your objective when you start your business is, and it's in the right industry and it's the right size and you think you're going to sell it in a relatively short period of time, it's got to go longer than five years, then you need to consider a being a C corp and qualifying is a small business corp.

If you don't go that way and most businesses do not, you're really looking for a entity, an S corp, limited liability, company taxes, a partnership. And that really is to avoid double taxation again, which is very significant. I could spend a lot of time on that. We don't have, but you have to understand that. You have to understand what double taxation means and how to avoid it. And I think a very important concept is that sellers and buyers are inherently at a conflict when it comes to tax considerations. A buyer wants to buy assets so we can depreciate those assets and write them off and a seller wants to sell his ownership interest, whether it be stock or partnership interest. So we can realize that capital gain, which is a much lower rate and also you could offset capital losses against it in your sale.

So there is an inherent conflict there that depend... And if you choose the right entity, whether it be an limited liability company or an S corporation, there are tax efficient ways to mitigate those differences between the seller and the buyer. It's complicated. We don't have enough time for that today, but section 338 and [inaudible 00:54:17] organizations are terms that I'll throw out there that if you're not familiar with them and you're thinking about selling your business or starting a business and thinking about the entity, they're are areas that you need to discuss with your tax advisors. But what I will say is that it is essential that you consider that upfront and plan accordingly if you're thinking about selling your business. Onofrio.

Onofrio Cirianni:So just close out in terms of summary, most of which we've covered today. Just final comment and maybe even taking another question. A lot of questions came in about the impact of COVID to transactions and I would tell you that buyers are looking at the impact of COVID specific to that business. They're getting very granular. So I'm going to use a wild example. If your business started selling masks and revenue tripled, that obviously may impact your future revenue. So they're really looking at what happened before, maybe during COVID and maybe they're taking a different viewpoint maybe on the specific industry and the risks that lie in there in terms of what's happened and that's affecting multiples, that's affecting the structures of the deals in terms of how long owners may stay on, how much it's going to be cash, how much will be an earn out as well. We would say that the activity is still relatively high and we always talk about things you can control and things you can't control when you're doing your own financial planning, your retirement planning.

And again, if your largest asset is your business is working on the business. So we would encourage all to focus on this as early as you possibly can because it does take a lot of time, effort, and energy and investment of even some dollars to get the right folks around the table to prepare you to hopefully have that optimal exit. Our hope is you enjoyed our presentation today, we promise we'll get back to you if you had additional questions that came in or feel free to reach out to Hal or myself at any time. Thank you.

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Hal Michels

Hal Michels is a Partner and in the Private Client Services Group and a Regional President in Prosperity – an EisnerAmper Company, with over 30 years of experience in public accounting.

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