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Welcome to BeansTalk, M&J's podcast where we are sharing and showcasing our areas of expertise through conversations with practice leaders on their knowledge and experience.
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Transactions are a natural part of the business life cycle.
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Whether you are looking to sell your business or expand through acquisitions, it might feel like unchartered territory.
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But the truth is the roadmap has already largely been written.
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Joining me today to discuss the world of deals and transactions is Micah Stewart, a leader and senior partner in our tax advisory and transaction advisory practices.
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Hey Micah.
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Hey, thanks.
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Micah, thank you so much for joining me on the microphone today to talk about the world of transaction advisory and buying and selling businesses.
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But before we dive in too much, will you do a favor for our audience and just give some background of your role at Mauldin & Jenkins and your experience?
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Thanks.
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Yeah.
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Like you said, I'm in our transaction advisory services group and our tax advisory services group.
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I'm a tax attorney by trade and been doing been with accounting firms and law firms and just been for about 20 years now in helping clients from a tax planning perspective.
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And Micah, just when it comes to your background and expertise as not just a tax expert, but also a tax attorney, that brings a tremendous amount of subject matter expertise to the space.
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So I'm really excited to have you here today to talk to me about this and that to kind of get us rolling.
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I'm just curious if you'll talk me through a little bit about the transaction landscape.
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Like as you're out there talking to clients and navigating, you know, the different businesses who are looking to maybe sell or think about acquisitions.
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Just kind of what are you hearing boots on the ground these days?
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Well, the market is pretty busy right now across all types of industries, I think, with the baby boomers starting to kind of get to that retirement age and looking to either exit or pass the business down to the next generation.
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You also see a lot of market consolidation well from the acquisition side because people see that those uh those owners are looking to exit, and so it makes a good target for them to maybe grow their share, their share of the capital in that given industry.
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So that makes sense that kind of generationally there's just a lot more activity in the market.
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But as you mentioned, definitely I think we're seeing that pretty widely across our client base.
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Just certain industries are experiencing more and more consolidations.
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Even those of us in professional services right now are accounting for that.
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Absolutely.
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Yeah, we're navigating that ourselves.
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And it also seems to me, too, there's just a lot of you know, kind of what they call dry powder out there right now, too.
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Kind of money being looked to go to.
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Exactly.
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There's a lot of cash in the market right now than people looking to spend, right?
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And um, you know, but you're also starting to see a little bit on the private equity side where those investors are starting to look for a return on their investment.
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So there's also private equity that's trying to unload some of their positions as well.
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Because that's something, I mean, you have experience, you work with with investment banks on the selling side, but also private equity on the buy side and family offices.
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And can you kind of talk me through that?
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Yeah, so we, I mean, generally, you know, you're working with private equity.
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With the intro is like you got a client that's selling into um maybe to a private equity, um, and so you get the relationships through there.
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But we also represent, we also represent a lot of private equity uh groups on the acquisition side and and handle all their tax compliance work as well after the act the acquisition.
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And then family offices I like to refer to as kind of like mini pegs, right?
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Mini private equity groups.
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And um, but they're just as active as a lot of the private equity groups, the private equity firms that are out there, even maybe even more so.
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And they um are definitely looking for more of that advisory role from that perspective.
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And I'm curious too, from like an industry perspective, the clients we work with, you know, we work with a wide range of industries kind of throughout the the corners of the firm, you know, and it seems like there's a lot of activity kind of throughout all those, but are you seeing some particular industry groups that this is kind of especially hot for right now?
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I know I made a joke that even us in professional services and accounting firms.
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Right, professional services is definitely one I I mean, it's really across the board.
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I mean, from construction to real estate, uh professional, like you say, professional services.
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It there's not an industry where the there's really kind of a slowdown.
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Even in the oil and gas industry or oil-field services, I mean, it's still very active.
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And and kind of talking about drivers, you know, we kind of mentioned, we kind of talked through the environment of kind of what's happening and how it's really, you know, cross lots of different segments.
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But you know, what what's your experience on some of the primary drivers that you know are leading owners to make a decision to pursue a transaction?
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You know, on both the buying and the selling side of things, what are what are key drivers you're seeing?
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Well, again, I mean, I think it's uh on the on the exit side, it's generally um I can't I'm not there's nobody in the next generation, especially if it's a closely held business, right?
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I mean, I think when you start talking about closely held businesses, and you're looking generally the owners are saying, hey, is there a way that I can move this down to the next generation?
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But that's not always a possibility.
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Uh either that next generation wants to do their own thing, or uh this is so specialized, maybe.
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Um there's that driver.
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Uh so then you so then you're maybe looking to key em how do I get this to key employees?
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Or if that's not a possibility, then now I'm looking for outside investment.
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It could be through private equity, right?
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Or it could be through what was once a competitor of yours.
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Maybe you're looking for consolidation.
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And so those are the key drivers, I think, on the sell side.
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And then on the on the buy side, again, it's I want to increase my market share, right?
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And or there's just some really good opportunities out there right now, too.
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So it's hard to pass up on a lot of this.
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And then the hard part there is, okay, now I need to find the capital for this acquisition.
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And how do I do that?
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And so even when you're dealing with a buyer, they might also be looking for help on a transaction advisory from a capital injection standpoint, right?
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Am I going out to traditional financing or am I looking for maybe bringing in private investors through preferred equity or something like that?
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Well, and it's funny, I uh had a discussion with with uh with one of our partners, Wendy, about just when it comes to kind of helping our clients beyond compliance.
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And some of the discussions we have with them is about seeking out capital to make some sort of strategic maneuver.
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You know, and oftentimes the first question she'll ask them is, well, why are you seeking capital?
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Like what's the purpose here?
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We're not just trying to shore up like like uh like standard operations, right?
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Like, yeah, we're not looking for cash to make distributions, right?
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Just to the owners, right?
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Yeah, that's like yeah.
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Why, why do you why you that's a good, I mean that's a good point, is why do you need that capital?
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And this is one of the drivers for the capital need.
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Like you were just saying, is oftentimes to pursue some type of transaction to expand, you know, to grow operations, to to find that great opportunity, to join forces with another you know, organization, you know.
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Right, that requires capital.
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Right, exactly, exactly, exactly.
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And like you said, or like you said earlier, there's a lot of dry powder out there, but it's just how what is the best way for you to access that dry powder?
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And then something I think too is even just expanding geographies.
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Right.
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Oh, 100%.
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Yeah.
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Uh it but that gets a little, I think from expanding geographies can be a little scary for those newly, those, those owners who are just now getting into that acquisition phase.
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I don't know that market, I don't know anybody in that market.
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And I think that is where we can come in and help, you know, with our on the due diligent side and get them a little bit more comfortable about going into that that new market, right?
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Exactly.
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Well, and I guess you know, talking about that due diligent side of things, that that brings me to sort of what's the role of an M&A advisor?
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Like, like when does somebody bring you in to some kind of a planning exercise or an ongoing deal?
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You know, kind of what what role do you, your team, and other relationships that you have in place play into this kind of world of transactions?
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Right.
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I I think with either buy side or a sell side, it's the earlier the better, is always the answer, right?
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But um, especially on the sell side, if you're before you're going out and marketing yourself or going maybe to a broker or you even way before you get into the LO, the letter of intent phase, or we say LOI phase, you should we definitely want to reach out and get somebody in because from a sell side, it can have a huge impact on your walk away cash number, right?
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I mean, I always talk about that is the most important number for a seller.
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It's not the sales price, it's what am I walking, what is the cash I'm walking away with after taxes, after paying off debt, after other kind of costs, right?
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And that that bottom line number.
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The top line number could be fantastic, but then you realize, oh, well, now I'm paying a bunch of tax at ordinary rates rather than capital gains rates, and that lowers that that bottom line number.
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Um, and so if we're getting in there early enough, we can make sure that there's no traps for an acquirer.
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Because an acquirer, when they do, they'll give you a great price on that letter of intent, and then they'll try to find ways to to whittle down.
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And so if we've been in there and helped from a due diligence standpoint, we can help maximize, keep that that that number closer to that what that original offer price was.
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So, like I guess there's there's oftentimes like that valuation side of things of kind of what is the business worth?
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And both both sides kind of trying to come to some kind of agreement around what the valuation is, but but even that valuation, there's a lot more that goes into that.
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Yeah.
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And and and I like that you bring up, you know, bring you in earlier rather than later, the sooner the better, because they're going to be studying your business.
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Oh, yes.
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I mean, through quality of earnings, right?
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And so if you, I mean, every bank that is going to finance an acquisition is gonna require a quality of earnings report.
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And so, you know, and the quality of earnings is like, okay, we're looking at are what you're reporting as as revenue, is that real, right?
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And then, you know, you kind of back out the the one-time things or the maybe, especially with when we see uh clients who are going to acquire really closely held businesses, family-owned businesses, how much of you know those expenses that those personal expenses that are rolling through that business, right?
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So we can back that kind of stuff out and say, look, these aren't real expenses that you're gonna be incurring.
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And so maybe those earnings are a little bit better than what we were seeing.
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Um that's kind of where that comes in.
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Because that's oftentimes the driver of some type of purchase price is that kind of EBITDA number, right?
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The earnings before interest, taxes, depreciation, amortization.
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But the thing is that EBITDA doesn't always tell the full story because there's more things that need to be adjusted to that.
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Correct, correct.
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Right.
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And so, you know, we help from that perspective.
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Either if you're on the sell side, we know that they're gonna be conducting a quality of earnings report, we can come in ahead and look and see what that's gonna be, or if they've already done one, right?
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The the buyer has already brought their people in, we can kind of come behind whoever conducted that quality of earnings study and do that.
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And then, you know, from a from a from an acquisition side too, we can also help on the value, the valuation uh of that business, right?
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And so those are two completely different things I don't think people really kind of uh understand is the difference between a quality of earnings versus a valuation, right?
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Evaluation is hey, here's here's what it looks like that's gonna be here's the real value of this company, not like not looking at the underlying earnings of that company, right?
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Exactly.
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And when it comes to underlying earnings, like the cash flow it's generating, you know, just the value it's generating for its owner group, like you mentioned before, a lot of times with closely held businesses, they're running certain expenses through it that that under a new ownership structure, a new management team, it's gonna look a little bit differently.
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Correct.
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Right, right, exactly, exactly.
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So it's trying to envision, okay, the new owner, what are they really inheriting?
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Right.
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And and is there and can can they look to see that, yeah, those earnings are gonna maybe that those earnings are gonna maybe increase because we're not we're not backing out all of those personal expenses, right?
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Or maybe they think, okay, well, they're doing these personal expenses, and this is something that maybe uh we can account for going forward.
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The company vehicle.
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Right.
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Exactly, exactly something of that nature.
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Yep.
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And and and and I like too that it's just really harping on the earlier the better, the sooner the better, because we know we're gonna have to navigate these diligence processes, this Q of E effort, this really normalizing the ebada, really going through this process of staying the business.
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Let's not wait to study the business when we're trying to finalize the deal.
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Let's do that earlier because there might also be opportunities to kind of maximize it.
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Start to pull a few levers and push a few buttons now to help us down the line.
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Right.
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I mean, if we we get in there earlier, we not only are we maybe increasing you you you're you're hoping to increase that EBITDA number because almost all these deals are a multiple of EBITDA.
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So the more we can drive up that EBITDA number, the better off it is for the seller, right?
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And then as a as a buyer, you're also looking to say, okay, you really want to get into those quality earnings reports.
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You really want to, and not necessarily you want to, you know, whittle down the purchase price, right?
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But you still want to make sure that what you're paying for, you're actually getting what you're paying for, right?
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You know, that's that's the deal.
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And so, yeah, if on a on a on a buy side, from a due diligence standpoint, we could go in there and say, here's some things that we are some really questionable issues, right?
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Uh, maybe with financials or just from operations in general, um, and say, you know, maybe this maybe we need to address that that that purchase price down a little bit because of these things.
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You know, one thing I see a lot of is uh where you're going to buy a business and maybe they the business is based on contractual relationships, right?
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And are those so when you're going to structure that transaction, maybe I can't buy just the assets of the company because those contracts aren't assignable, right?
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Or uh maybe even if I buy the interest in the company instead of just the assets, there's some kind of provision that says if there's a change in ownership, then you have to you have to notify the other party to that contract.
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And those things can drive uh drive the purchase price up or down, right?
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Like if I can't take on these contracts without renegotiating with the other party, and I don't think that other party is going to want to negotiate with me, then I maybe that that that revenue number goes down.
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So those are the kinds of things that we we look at outside of just tax and QOE and valuation.
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And generally that's where we say, okay, if we're brought in early, that's when we say, okay, now we need to bring in the attorneys to come in and look at these contracts to say, hey, analyze this and make sure that this is something that we can actually take over.
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And so I think that's why, again, why it's important to bring us in as early as possible so that we can identify those kinds of issues and say you need to go see the we can't do it as an accounting firm, but we can help you find a good attorney that can help analyze those contracts.
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Because the balance sheet and PL don't tell the entire story.
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That's exactly right.
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Those intangibles, those client lists and contracts and all that, they have real implications.
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Right, exactly.
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And so we just kind of talk through a few different players too, as part of like almost a broader deal team.
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And that's something me as a business owner kind of you know, starting to explore, you know, different types of deals, just help me get a sense of the overarching environment of the different kind of professionals who I want kind of at the ready for me.
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I know an overarching MA expert who just knows the space, has been through this with a lot of the different clients, and then also has the teams for the diligence in Q of E.
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But you also reference the the needs for MA attorneys at different states to the kind of just review contracts and then help formalize the deal.
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And I got wealth managers knocking on my door thinking about what are you gonna do at the outset?
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You know, yeah, that's a big one.
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So who are all kind of the players in the space and how does somebody like you help bring all those together?
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So again, I think from a sell side, you know, the players are, and this is kind of what I like to, this is why I like of, I think of us as a our transaction advisory group is almost like a one-stop shop, right?
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Is you know, when you're selling, it's okay, help me get the best best deal I can, right?
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Uh do the do all the due diligence beforehand, and then uh help me from a tax planning perspective maximize or maximize my return.
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Um you want to try to get as much capital gains as I possibly can for as compared to ordinary rates.
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Um and then now I've got all this cash, right?
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What uh what am I gonna do with it?
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So that from a we've got a state planning group here with Maldon Jenkins, it's fantastic.
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And we've got a wealth management group.
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We can help with all of that as a so, like I said, it's kind of like a one-stop shop.
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And I think you see advice other advisors outside, like so attorneys, bankers, they they notice that kind of thing.
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And they they can say, yep, these people are gonna be a real asset to me as well, helping my client.
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Um, and I'm gonna look better for kind of bringing, steering them to this group because they can provide all those services.
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And and now also, do you find value in just if a client reaches out to you, they're thinking about maybe selling someday, like introducing them to a bank just to kind of help them walk through the process, not any commitments, or on the other side, just they're thinking about maybe, you know, talking to private equity just to see what would it look like to kind of have PE come into play.
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Like, do you find value in just introducing them to other clients?
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Absolutely, right?
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Because and even before you go into this process, look, I've had many clients that have started the process, think they're gonna pull the trigger, and then back array, and then maybe and then they're starting again a couple a couple of years later.
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The whole going through those kind of introductions and meeting those kinds of people, it helps broaden your base, broaden those the base of or group of potential acquirers, right?
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So you're not just looking at one group.
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If you're talking to maybe some bankers and then a broker or private equity, you're you're you're out there and you got everybody looking at you now, not just not just those, that banker who can maybe say, Yeah, I can go help you find another one of my clients that might be interested in acquiring.
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So so talking to somebody like Lee, it's not just bringing in you, it's also bringing in your team.
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But it's not just bringing in your team, it's also bringing in your your whole network.
00:18:20.720 --> 00:18:21.440
Right, exactly.
00:18:21.440 --> 00:18:35.519
You know, another one outside of just the lawyer, uh, you know, the contract issue is you know, uh, you're buying a big pri a big firm or a big uh business that has a lot of employees from a H you need to need somebody to come in from an HR perspective as well.
00:18:35.519 --> 00:18:40.079
I think we're seeing a lot more of that uh uh from a HR consulting side too.
00:18:40.079 --> 00:18:43.680
So I think like you said, it's it's a whole it's a whole village, right?
00:18:43.680 --> 00:18:46.559
It's not just it's it there's a lot of a lot of help.
00:18:46.880 --> 00:18:50.319
When you mention HR, there's also it seems like technology considerations.
00:18:50.319 --> 00:18:58.240
Just as technology is more and more of a headline of how are we gonna kind of combine systems and integrate and absolutely, absolutely.
00:18:58.240 --> 00:19:05.359
So so so with all that kind of said, I guess talk me through some of the uh the downfalls and pitfalls of maybe waiting too long.
00:19:05.359 --> 00:19:10.960
Like I guess you know what what's you know what what's the risk of not trying to be as proactive as we're outlining?
00:19:11.440 --> 00:19:20.799
Well again, I think the risk is if you're if you're the acquirer and you've got you know, you've already entered into some kind of LOI phase, right?
00:19:20.799 --> 00:19:25.599
So where you've got a you've got a clock ticking on that due diligence side, you're kind of limiting yourself, right?
00:19:25.599 --> 00:19:36.319
Um that where we could come in and and and typically we can get those things, we can kind of come in and get that done, but you never it depends on the size of the business that you're acquiring.
00:19:36.319 --> 00:19:40.720
And from the sell side, it has a big impact on the purchase price, right?
00:19:40.720 --> 00:19:52.319
So if we come in after the LOI has already been signed and they're already doing their due diligence and you've already turned over all of your financials, it's kind of late in the game for us to kind of come in and and and help, you know.
00:19:52.319 --> 00:19:58.079
Um so again, I think that's those are the pitfalls of waiting too long to bring us in.
00:19:58.400 --> 00:20:10.240
So regardless of where somebody is in this cycle, at least give you a phone call to give you a snapshot of okay, where are we, what's been done, what are next steps, how can from at this point in time we really maximize the opportunities.
00:20:10.240 --> 00:20:17.440
There's always opportunities to kind of maximize the outcomes, but you know, even if it's three years out, let's still have a conversation.
00:20:17.680 --> 00:20:18.880
Oh yeah, 100%, right?
00:20:18.880 --> 00:20:21.039
I mean, and and you revisit it, right?
00:20:21.039 --> 00:20:27.119
Like I said, I've had clients that have started the process and then put it down for a year or two and then go back, go back to the well, right?
00:20:27.119 --> 00:20:32.400
Um and you know, it does help.
00:20:32.400 --> 00:20:35.359
And things change over two or three years, right?
00:20:35.359 --> 00:20:46.640
And so even if we've helped you out maybe a year ago and that sale didn't go through but for different reasons, uh, we sh you could still bring us back in, you know, if you're every two or three years, right?
00:20:46.640 --> 00:20:49.200
You know, just to kind of refresh what we've done before.
00:20:49.519 --> 00:20:55.920
And that's something, even if you know I'm not thinking about selling until another three or so years out, it's just something in the back of my mind.
00:20:55.920 --> 00:21:01.039
Honestly, I find a little bit of fun to talk about my business with somebody like you.
00:21:01.039 --> 00:21:09.519
I have my head down in the activities and operations so much to actually take a step back and think about the business as its entity and what are the plans for that, you know.
00:21:09.759 --> 00:21:10.000
Right.
00:21:10.000 --> 00:21:12.799
And then like, wow, I can walk away with this much cash.
00:21:12.799 --> 00:21:13.039
Right.
00:21:13.039 --> 00:21:16.640
You know, that really does get the the wheels kind of turning, right?
00:21:16.640 --> 00:21:17.519
You know, so yep.
00:21:17.839 --> 00:21:23.440
And that's something too, you know, because hopefully there will be some kind of significant financial wealth event on the back end of this too.
00:21:23.440 --> 00:21:25.680
So just to kind of keep those dreams in mind as well.
00:21:25.680 --> 00:21:26.960
Right, exactly.
00:21:26.960 --> 00:21:37.599
And and Micah, you know, something that kind of comes to my mind too is just there's oftentimes things outside of our control, external factors we need to kind of keep a pulse on.
00:21:37.599 --> 00:21:40.880
Can you talk me through what some of those look like, what some of those are?
00:21:41.279 --> 00:21:46.400
Well, a lot of it, right, is on the legislative changes or regulatory changes.
00:21:46.400 --> 00:21:48.880
And legislative changes happen all the time.
00:21:48.880 --> 00:22:01.759
And you know, a good example is if I think capital gains rates are going to go up in 2028, maybe I'm really looking to structure a cell now and try to make sure that I'm maximizing on these lower capital gains rates.
00:22:01.759 --> 00:22:16.480
And again, that's something that's hard to plan for, and we see it happen, right, every four to eight years when you have changes in uh control at the at kind of the congressional level or at the White House level, and it's that steers policy, right?
00:22:16.480 --> 00:22:34.880
And so uh that's definitely something where you need to be and keep that in mind and are reaching out to us so we can help you advise you and say, yeah, we this is probably something that's gonna happen, or we think this is a something that we need to keep an eye on, and it might you might want to speed up your your sale.
00:22:34.880 --> 00:23:04.480
And then from you know, when we're dealing with private equity and hedge funds, uh there's always this the interest at the legislative level on carried interest and taxing uh trying to subject that to ordinary income rates, those the those those carries, as well as there's a lot of movement right now by the IRS to subject uh private equity owners and hedge fund owners to self-employment tax if they own, if they're operating through uh a limited partnership.
00:23:04.480 --> 00:23:08.240
So those are all the things that we try to keep an eye on from a tax perspective.
00:23:08.240 --> 00:23:09.599
And that's just the tax world.
00:23:09.599 --> 00:23:17.920
You know, outside of that, just recently we've seen legislation regarding home ownership and limiting the number of houses somebody can own.
00:23:17.920 --> 00:23:27.519
That really affects private equity, who were especially a lot of the private equity that was involved or interested in the single family unit rental business.
00:23:27.519 --> 00:23:32.720
And so now they are gonna have to change their strategy, right?
00:23:32.720 --> 00:23:35.759
Because just this legislation that just came out.
00:23:36.160 --> 00:23:39.519
And and that's where just there's it feels like there's so many moving targets.
00:23:39.519 --> 00:23:50.000
And and oftentimes it feels difficult when I'm trying to go it alone in terms of okay, if I try and plan three, four years out based on current regulations, are those regulations maybe gonna change?
00:23:50.319 --> 00:23:51.119
Right, right.
00:23:51.359 --> 00:23:52.160
So that's one more thing.
00:23:52.160 --> 00:23:53.759
Okay, Micah, I just need to give you a call.
00:23:55.279 --> 00:23:56.559
I mean, we see that all the time.
00:23:56.559 --> 00:24:01.680
But regulations change on a on a I mean, administration by administration basis.
00:24:01.680 --> 00:24:03.279
And that's and it's hard to keep up.
00:24:03.279 --> 00:24:09.440
It's so hard for business owners to keep up with all of these changes uh and plan and plan accordingly.
00:24:09.440 --> 00:24:16.160
You just can't plan when you don't know when there's no long-term uh policy.
00:24:16.480 --> 00:24:24.559
Well, Micah, I'm definitely gonna need to bring you back for just a more of a deep dive on planning generally when it comes to tax and other business considerations.
00:24:24.559 --> 00:24:33.440
Uh, but before I let you go on this episode, we just kind of do a favor for our audience and just what are some other thoughts you have in mind or last-minute advice or just a key takeaways you want to leave our audience with?
00:24:33.920 --> 00:24:40.720
If you're looking to acquire or looking to sell, the earlier we can get in, the better off you're gonna be from either perspective.
00:24:41.039 --> 00:24:41.359
Awesome.
00:24:41.359 --> 00:24:42.799
Well, Micah, thank you for joining me.
00:24:42.799 --> 00:24:45.440
I'll definitely be asking you back to the microphone again.
00:24:45.440 --> 00:24:47.680
And thank you to our audience for listening.
00:24:47.680 --> 00:24:58.480
If you have any follow-up questions about the business issues we discussed today or any other business challenges you're navigating, please don't hesitate to contact us at www.mjcpa.com.
00:00:02.959 --> 00:00:13.279
Welcome to BeansTalk, M&J's podcast where we are sharing and showcasing our areas of expertise through conversations with practice leaders on their knowledge and experience.
00:00:13.279 --> 00:00:18.559
Transactions are a natural part of the business life cycle.
00:00:18.559 --> 00:00:27.039
Whether you are looking to sell your business or expand through acquisitions, it might feel like unchartered territory.
00:00:27.039 --> 00:00:31.679
But the truth is the roadmap has already largely been written.
00:00:31.679 --> 00:00:44.320
Joining me today to discuss the world of deals and transactions is Micah Stewart, a leader and senior partner in our tax advisory and transaction advisory practices.
00:00:44.320 --> 00:00:45.359
Hey Micah.
00:00:45.679 --> 00:00:46.240
Hey, thanks.
00:00:46.640 --> 00:00:53.039
Micah, thank you so much for joining me on the microphone today to talk about the world of transaction advisory and buying and selling businesses.
00:00:53.039 --> 00:01:00.079
But before we dive in too much, will you do a favor for our audience and just give some background of your role at Mauldin & Jenkins and your experience?
00:01:00.479 --> 00:01:00.640
Thanks.
00:01:00.640 --> 00:01:00.960
Yeah.
00:01:00.960 --> 00:01:05.519
Like you said, I'm in our transaction advisory services group and our tax advisory services group.
00:01:05.519 --> 00:01:19.359
I'm a tax attorney by trade and been doing been with accounting firms and law firms and just been for about 20 years now in helping clients from a tax planning perspective.
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And Micah, just when it comes to your background and expertise as not just a tax expert, but also a tax attorney, that brings a tremendous amount of subject matter expertise to the space.
00:01:29.200 --> 00:01:33.920
So I'm really excited to have you here today to talk to me about this and that to kind of get us rolling.
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I'm just curious if you'll talk me through a little bit about the transaction landscape.
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Like as you're out there talking to clients and navigating, you know, the different businesses who are looking to maybe sell or think about acquisitions.
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Just kind of what are you hearing boots on the ground these days?
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Well, the market is pretty busy right now across all types of industries, I think, with the baby boomers starting to kind of get to that retirement age and looking to either exit or pass the business down to the next generation.
00:02:01.280 --> 00:02:15.280
You also see a lot of market consolidation well from the acquisition side because people see that those uh those owners are looking to exit, and so it makes a good target for them to maybe grow their share, their share of the capital in that given industry.
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So that makes sense that kind of generationally there's just a lot more activity in the market.
00:02:20.879 --> 00:02:25.280
But as you mentioned, definitely I think we're seeing that pretty widely across our client base.
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Just certain industries are experiencing more and more consolidations.
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Even those of us in professional services right now are accounting for that.
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Absolutely.
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Yeah, we're navigating that ourselves.
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And it also seems to me, too, there's just a lot of you know, kind of what they call dry powder out there right now, too.
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Kind of money being looked to go to.
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Exactly.
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There's a lot of cash in the market right now than people looking to spend, right?
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And um, you know, but you're also starting to see a little bit on the private equity side where those investors are starting to look for a return on their investment.
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So there's also private equity that's trying to unload some of their positions as well.
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Because that's something, I mean, you have experience, you work with with investment banks on the selling side, but also private equity on the buy side and family offices.
00:03:03.520 --> 00:03:05.360
And can you kind of talk me through that?
00:03:05.759 --> 00:03:11.280
Yeah, so we, I mean, generally, you know, you're working with private equity.
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With the intro is like you got a client that's selling into um maybe to a private equity, um, and so you get the relationships through there.
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But we also represent, we also represent a lot of private equity uh groups on the acquisition side and and handle all their tax compliance work as well after the act the acquisition.
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And then family offices I like to refer to as kind of like mini pegs, right?
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Mini private equity groups.
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And um, but they're just as active as a lot of the private equity groups, the private equity firms that are out there, even maybe even more so.
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And they um are definitely looking for more of that advisory role from that perspective.
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And I'm curious too, from like an industry perspective, the clients we work with, you know, we work with a wide range of industries kind of throughout the the corners of the firm, you know, and it seems like there's a lot of activity kind of throughout all those, but are you seeing some particular industry groups that this is kind of especially hot for right now?
00:04:05.280 --> 00:04:08.319
I know I made a joke that even us in professional services and accounting firms.
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Right, professional services is definitely one I I mean, it's really across the board.
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I mean, from construction to real estate, uh professional, like you say, professional services.
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It there's not an industry where the there's really kind of a slowdown.
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Even in the oil and gas industry or oil-field services, I mean, it's still very active.
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And and kind of talking about drivers, you know, we kind of mentioned, we kind of talked through the environment of kind of what's happening and how it's really, you know, cross lots of different segments.
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But you know, what what's your experience on some of the primary drivers that you know are leading owners to make a decision to pursue a transaction?
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You know, on both the buying and the selling side of things, what are what are key drivers you're seeing?
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Well, again, I mean, I think it's uh on the on the exit side, it's generally um I can't I'm not there's nobody in the next generation, especially if it's a closely held business, right?
00:05:00.399 --> 00:05:07.759
I mean, I think when you start talking about closely held businesses, and you're looking generally the owners are saying, hey, is there a way that I can move this down to the next generation?
00:05:07.759 --> 00:05:09.519
But that's not always a possibility.
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Uh either that next generation wants to do their own thing, or uh this is so specialized, maybe.
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Um there's that driver.
00:05:17.759 --> 00:05:22.079
Uh so then you so then you're maybe looking to key em how do I get this to key employees?
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Or if that's not a possibility, then now I'm looking for outside investment.
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It could be through private equity, right?
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Or it could be through what was once a competitor of yours.
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Maybe you're looking for consolidation.
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And so those are the key drivers, I think, on the sell side.
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And then on the on the buy side, again, it's I want to increase my market share, right?
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And or there's just some really good opportunities out there right now, too.
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So it's hard to pass up on a lot of this.
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And then the hard part there is, okay, now I need to find the capital for this acquisition.
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And how do I do that?
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And so even when you're dealing with a buyer, they might also be looking for help on a transaction advisory from a capital injection standpoint, right?
00:06:02.560 --> 00:06:10.160
Am I going out to traditional financing or am I looking for maybe bringing in private investors through preferred equity or something like that?
00:06:10.480 --> 00:06:19.439
Well, and it's funny, I uh had a discussion with with uh with one of our partners, Wendy, about just when it comes to kind of helping our clients beyond compliance.
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And some of the discussions we have with them is about seeking out capital to make some sort of strategic maneuver.
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You know, and oftentimes the first question she'll ask them is, well, why are you seeking capital?
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Like what's the purpose here?
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We're not just trying to shore up like like uh like standard operations, right?
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Like, yeah, we're not looking for cash to make distributions, right?
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Just to the owners, right?
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Yeah, that's like yeah.
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Why, why do you why you that's a good, I mean that's a good point, is why do you need that capital?
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And this is one of the drivers for the capital need.
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Like you were just saying, is oftentimes to pursue some type of transaction to expand, you know, to grow operations, to to find that great opportunity, to join forces with another you know, organization, you know.
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Right, that requires capital.
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Right, exactly, exactly, exactly.
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And like you said, or like you said earlier, there's a lot of dry powder out there, but it's just how what is the best way for you to access that dry powder?
00:07:06.879 --> 00:07:10.319
And then something I think too is even just expanding geographies.
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Right.
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Oh, 100%.
00:07:11.439 --> 00:07:12.319
Yeah.
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Uh it but that gets a little, I think from expanding geographies can be a little scary for those newly, those, those owners who are just now getting into that acquisition phase.
00:07:23.600 --> 00:07:26.240
I don't know that market, I don't know anybody in that market.
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And I think that is where we can come in and help, you know, with our on the due diligent side and get them a little bit more comfortable about going into that that new market, right?
00:07:36.240 --> 00:07:36.959
Exactly.
00:07:36.959 --> 00:07:45.199
Well, and I guess you know, talking about that due diligent side of things, that that brings me to sort of what's the role of an M&A advisor?
00:07:45.199 --> 00:07:51.439
Like, like when does somebody bring you in to some kind of a planning exercise or an ongoing deal?
00:07:51.439 --> 00:07:58.800
You know, kind of what what role do you, your team, and other relationships that you have in place play into this kind of world of transactions?
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Right.
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I I think with either buy side or a sell side, it's the earlier the better, is always the answer, right?
00:08:04.240 --> 00:08:28.720
But um, especially on the sell side, if you're before you're going out and marketing yourself or going maybe to a broker or you even way before you get into the LO, the letter of intent phase, or we say LOI phase, you should we definitely want to reach out and get somebody in because from a sell side, it can have a huge impact on your walk away cash number, right?
00:08:28.720 --> 00:08:32.639
I mean, I always talk about that is the most important number for a seller.
00:08:32.639 --> 00:08:40.960
It's not the sales price, it's what am I walking, what is the cash I'm walking away with after taxes, after paying off debt, after other kind of costs, right?
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And that that bottom line number.
00:08:42.799 --> 00:08:53.519
The top line number could be fantastic, but then you realize, oh, well, now I'm paying a bunch of tax at ordinary rates rather than capital gains rates, and that lowers that that bottom line number.
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Um, and so if we're getting in there early enough, we can make sure that there's no traps for an acquirer.
00:09:00.240 --> 00:09:06.879
Because an acquirer, when they do, they'll give you a great price on that letter of intent, and then they'll try to find ways to to whittle down.
00:09:06.879 --> 00:09:18.240
And so if we've been in there and helped from a due diligence standpoint, we can help maximize, keep that that that number closer to that what that original offer price was.
00:09:18.480 --> 00:09:23.360
So, like I guess there's there's oftentimes like that valuation side of things of kind of what is the business worth?
00:09:23.360 --> 00:09:32.080
And both both sides kind of trying to come to some kind of agreement around what the valuation is, but but even that valuation, there's a lot more that goes into that.
00:09:32.080 --> 00:09:32.639
Yeah.
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And and and I like that you bring up, you know, bring you in earlier rather than later, the sooner the better, because they're going to be studying your business.
00:09:41.279 --> 00:09:41.759
Oh, yes.
00:09:41.759 --> 00:09:43.919
I mean, through quality of earnings, right?
00:09:43.919 --> 00:09:51.120
And so if you, I mean, every bank that is going to finance an acquisition is gonna require a quality of earnings report.
00:09:51.120 --> 00:09:58.960
And so, you know, and the quality of earnings is like, okay, we're looking at are what you're reporting as as revenue, is that real, right?
00:09:58.960 --> 00:10:15.919
And then, you know, you kind of back out the the one-time things or the maybe, especially with when we see uh clients who are going to acquire really closely held businesses, family-owned businesses, how much of you know those expenses that those personal expenses that are rolling through that business, right?
00:10:15.919 --> 00:10:19.759
So we can back that kind of stuff out and say, look, these aren't real expenses that you're gonna be incurring.
00:10:19.759 --> 00:10:23.440
And so maybe those earnings are a little bit better than what we were seeing.
00:10:23.440 --> 00:10:26.159
Um that's kind of where that comes in.
00:10:26.480 --> 00:10:31.600
Because that's oftentimes the driver of some type of purchase price is that kind of EBITDA number, right?
00:10:31.600 --> 00:10:34.720
The earnings before interest, taxes, depreciation, amortization.
00:10:34.720 --> 00:10:38.960
But the thing is that EBITDA doesn't always tell the full story because there's more things that need to be adjusted to that.
00:10:39.200 --> 00:10:40.080
Correct, correct.
00:10:40.080 --> 00:10:40.320
Right.
00:10:40.320 --> 00:10:42.720
And so, you know, we help from that perspective.
00:10:42.720 --> 00:10:52.159
Either if you're on the sell side, we know that they're gonna be conducting a quality of earnings report, we can come in ahead and look and see what that's gonna be, or if they've already done one, right?
00:10:52.159 --> 00:10:58.639
The the buyer has already brought their people in, we can kind of come behind whoever conducted that quality of earnings study and do that.
00:10:58.639 --> 00:11:08.320
And then, you know, from a from a from an acquisition side too, we can also help on the value, the valuation uh of that business, right?
00:11:08.320 --> 00:11:17.360
And so those are two completely different things I don't think people really kind of uh understand is the difference between a quality of earnings versus a valuation, right?
00:11:17.360 --> 00:11:26.480
Evaluation is hey, here's here's what it looks like that's gonna be here's the real value of this company, not like not looking at the underlying earnings of that company, right?
00:11:26.720 --> 00:11:27.120
Exactly.
00:11:27.120 --> 00:11:44.799
And when it comes to underlying earnings, like the cash flow it's generating, you know, just the value it's generating for its owner group, like you mentioned before, a lot of times with closely held businesses, they're running certain expenses through it that that under a new ownership structure, a new management team, it's gonna look a little bit differently.
00:11:44.799 --> 00:11:45.440
Correct.
00:11:45.440 --> 00:11:46.960
Right, right, exactly, exactly.
00:11:46.960 --> 00:11:51.200
So it's trying to envision, okay, the new owner, what are they really inheriting?
00:11:51.600 --> 00:11:51.759
Right.
00:11:51.759 --> 00:12:03.279
And and is there and can can they look to see that, yeah, those earnings are gonna maybe that those earnings are gonna maybe increase because we're not we're not backing out all of those personal expenses, right?
00:12:03.279 --> 00:12:10.639
Or maybe they think, okay, well, they're doing these personal expenses, and this is something that maybe uh we can account for going forward.
00:12:10.639 --> 00:12:11.759
The company vehicle.
00:12:12.080 --> 00:12:12.159
Right.
00:12:12.159 --> 00:12:14.960
Exactly, exactly something of that nature.
00:12:14.960 --> 00:12:15.679
Yep.
00:12:15.679 --> 00:12:29.200
And and and and I like too that it's just really harping on the earlier the better, the sooner the better, because we know we're gonna have to navigate these diligence processes, this Q of E effort, this really normalizing the ebada, really going through this process of staying the business.
00:12:29.200 --> 00:12:33.360
Let's not wait to study the business when we're trying to finalize the deal.
00:12:33.360 --> 00:12:37.840
Let's do that earlier because there might also be opportunities to kind of maximize it.
00:12:37.840 --> 00:12:42.480
Start to pull a few levers and push a few buttons now to help us down the line.
00:12:42.480 --> 00:12:42.799
Right.
00:12:42.879 --> 00:12:55.200
I mean, if we we get in there earlier, we not only are we maybe increasing you you you're you're hoping to increase that EBITDA number because almost all these deals are a multiple of EBITDA.
00:12:55.200 --> 00:13:00.240
So the more we can drive up that EBITDA number, the better off it is for the seller, right?
00:13:00.240 --> 00:13:08.159
And then as a as a buyer, you're also looking to say, okay, you really want to get into those quality earnings reports.
00:13:08.159 --> 00:13:14.159
You really want to, and not necessarily you want to, you know, whittle down the purchase price, right?
00:13:14.159 --> 00:13:18.879
But you still want to make sure that what you're paying for, you're actually getting what you're paying for, right?
00:13:18.879 --> 00:13:20.480
You know, that's that's the deal.
00:13:20.480 --> 00:13:31.600
And so, yeah, if on a on a on a buy side, from a due diligence standpoint, we could go in there and say, here's some things that we are some really questionable issues, right?
00:13:31.600 --> 00:13:43.679
Uh, maybe with financials or just from operations in general, um, and say, you know, maybe this maybe we need to address that that that purchase price down a little bit because of these things.
00:13:43.679 --> 00:13:55.519
You know, one thing I see a lot of is uh where you're going to buy a business and maybe they the business is based on contractual relationships, right?
00:13:55.519 --> 00:14:04.879
And are those so when you're going to structure that transaction, maybe I can't buy just the assets of the company because those contracts aren't assignable, right?
00:14:04.879 --> 00:14:19.919
Or uh maybe even if I buy the interest in the company instead of just the assets, there's some kind of provision that says if there's a change in ownership, then you have to you have to notify the other party to that contract.
00:14:19.919 --> 00:14:24.960
And those things can drive uh drive the purchase price up or down, right?
00:14:24.960 --> 00:14:35.360
Like if I can't take on these contracts without renegotiating with the other party, and I don't think that other party is going to want to negotiate with me, then I maybe that that that revenue number goes down.
00:14:35.360 --> 00:14:40.879
So those are the kinds of things that we we look at outside of just tax and QOE and valuation.
00:14:40.879 --> 00:14:53.360
And generally that's where we say, okay, if we're brought in early, that's when we say, okay, now we need to bring in the attorneys to come in and look at these contracts to say, hey, analyze this and make sure that this is something that we can actually take over.
00:14:53.360 --> 00:15:07.759
And so I think that's why, again, why it's important to bring us in as early as possible so that we can identify those kinds of issues and say you need to go see the we can't do it as an accounting firm, but we can help you find a good attorney that can help analyze those contracts.
00:15:08.240 --> 00:15:11.120
Because the balance sheet and PL don't tell the entire story.
00:15:11.440 --> 00:15:12.000
That's exactly right.
00:15:12.320 --> 00:15:17.440
Those intangibles, those client lists and contracts and all that, they have real implications.
00:15:17.440 --> 00:15:18.320
Right, exactly.
00:15:18.320 --> 00:15:23.519
And so we just kind of talk through a few different players too, as part of like almost a broader deal team.
00:15:23.519 --> 00:15:35.120
And that's something me as a business owner kind of you know, starting to explore, you know, different types of deals, just help me get a sense of the overarching environment of the different kind of professionals who I want kind of at the ready for me.
00:15:35.120 --> 00:15:43.279
I know an overarching MA expert who just knows the space, has been through this with a lot of the different clients, and then also has the teams for the diligence in Q of E.
00:15:43.279 --> 00:15:50.559
But you also reference the the needs for MA attorneys at different states to the kind of just review contracts and then help formalize the deal.
00:15:50.559 --> 00:15:54.399
And I got wealth managers knocking on my door thinking about what are you gonna do at the outset?
00:15:54.399 --> 00:15:55.600
You know, yeah, that's a big one.
00:15:55.600 --> 00:16:00.080
So who are all kind of the players in the space and how does somebody like you help bring all those together?
00:16:00.320 --> 00:16:10.399
So again, I think from a sell side, you know, the players are, and this is kind of what I like to, this is why I like of, I think of us as a our transaction advisory group is almost like a one-stop shop, right?
00:16:10.399 --> 00:16:16.000
Is you know, when you're selling, it's okay, help me get the best best deal I can, right?
00:16:16.000 --> 00:16:26.080
Uh do the do all the due diligence beforehand, and then uh help me from a tax planning perspective maximize or maximize my return.
00:16:26.080 --> 00:16:31.519
Um you want to try to get as much capital gains as I possibly can for as compared to ordinary rates.
00:16:31.519 --> 00:16:34.080
Um and then now I've got all this cash, right?
00:16:34.080 --> 00:16:35.360
What uh what am I gonna do with it?
00:16:35.360 --> 00:16:40.240
So that from a we've got a state planning group here with Maldon Jenkins, it's fantastic.
00:16:40.240 --> 00:16:41.840
And we've got a wealth management group.
00:16:41.840 --> 00:16:45.679
We can help with all of that as a so, like I said, it's kind of like a one-stop shop.
00:16:45.679 --> 00:16:51.759
And I think you see advice other advisors outside, like so attorneys, bankers, they they notice that kind of thing.
00:16:51.759 --> 00:16:58.399
And they they can say, yep, these people are gonna be a real asset to me as well, helping my client.
00:16:58.399 --> 00:17:06.480
Um, and I'm gonna look better for kind of bringing, steering them to this group because they can provide all those services.
00:17:06.799 --> 00:17:26.559
And and now also, do you find value in just if a client reaches out to you, they're thinking about maybe selling someday, like introducing them to a bank just to kind of help them walk through the process, not any commitments, or on the other side, just they're thinking about maybe, you know, talking to private equity just to see what would it look like to kind of have PE come into play.
00:17:26.559 --> 00:17:29.039
Like, do you find value in just introducing them to other clients?
00:17:29.039 --> 00:17:30.000
Absolutely, right?
00:17:30.079 --> 00:17:43.680
Because and even before you go into this process, look, I've had many clients that have started the process, think they're gonna pull the trigger, and then back array, and then maybe and then they're starting again a couple a couple of years later.
00:17:43.680 --> 00:17:57.039
The whole going through those kind of introductions and meeting those kinds of people, it helps broaden your base, broaden those the base of or group of potential acquirers, right?
00:17:57.039 --> 00:17:58.480
So you're not just looking at one group.
00:17:58.480 --> 00:18:12.079
If you're talking to maybe some bankers and then a broker or private equity, you're you're you're out there and you got everybody looking at you now, not just not just those, that banker who can maybe say, Yeah, I can go help you find another one of my clients that might be interested in acquiring.
00:18:12.400 --> 00:18:17.039
So so talking to somebody like Lee, it's not just bringing in you, it's also bringing in your team.
00:18:17.039 --> 00:18:20.400
But it's not just bringing in your team, it's also bringing in your your whole network.
00:18:20.720 --> 00:18:21.440
Right, exactly.
00:18:21.440 --> 00:18:35.519
You know, another one outside of just the lawyer, uh, you know, the contract issue is you know, uh, you're buying a big pri a big firm or a big uh business that has a lot of employees from a H you need to need somebody to come in from an HR perspective as well.
00:18:35.519 --> 00:18:40.079
I think we're seeing a lot more of that uh uh from a HR consulting side too.
00:18:40.079 --> 00:18:43.680
So I think like you said, it's it's a whole it's a whole village, right?
00:18:43.680 --> 00:18:46.559
It's not just it's it there's a lot of a lot of help.
00:18:46.880 --> 00:18:50.319
When you mention HR, there's also it seems like technology considerations.
00:18:50.319 --> 00:18:58.240
Just as technology is more and more of a headline of how are we gonna kind of combine systems and integrate and absolutely, absolutely.
00:18:58.240 --> 00:19:05.359
So so so with all that kind of said, I guess talk me through some of the uh the downfalls and pitfalls of maybe waiting too long.
00:19:05.359 --> 00:19:10.960
Like I guess you know what what's you know what what's the risk of not trying to be as proactive as we're outlining?
00:19:11.440 --> 00:19:20.799
Well again, I think the risk is if you're if you're the acquirer and you've got you know, you've already entered into some kind of LOI phase, right?
00:19:20.799 --> 00:19:25.599
So where you've got a you've got a clock ticking on that due diligence side, you're kind of limiting yourself, right?
00:19:25.599 --> 00:19:36.319
Um that where we could come in and and and typically we can get those things, we can kind of come in and get that done, but you never it depends on the size of the business that you're acquiring.
00:19:36.319 --> 00:19:40.720
And from the sell side, it has a big impact on the purchase price, right?
00:19:40.720 --> 00:19:52.319
So if we come in after the LOI has already been signed and they're already doing their due diligence and you've already turned over all of your financials, it's kind of late in the game for us to kind of come in and and and help, you know.
00:19:52.319 --> 00:19:58.079
Um so again, I think that's those are the pitfalls of waiting too long to bring us in.
00:19:58.400 --> 00:20:10.240
So regardless of where somebody is in this cycle, at least give you a phone call to give you a snapshot of okay, where are we, what's been done, what are next steps, how can from at this point in time we really maximize the opportunities.
00:20:10.240 --> 00:20:17.440
There's always opportunities to kind of maximize the outcomes, but you know, even if it's three years out, let's still have a conversation.
00:20:17.680 --> 00:20:18.880
Oh yeah, 100%, right?
00:20:18.880 --> 00:20:21.039
I mean, and and you revisit it, right?
00:20:21.039 --> 00:20:27.119
Like I said, I've had clients that have started the process and then put it down for a year or two and then go back, go back to the well, right?
00:20:27.119 --> 00:20:32.400
Um and you know, it does help.
00:20:32.400 --> 00:20:35.359
And things change over two or three years, right?
00:20:35.359 --> 00:20:46.640
And so even if we've helped you out maybe a year ago and that sale didn't go through but for different reasons, uh, we sh you could still bring us back in, you know, if you're every two or three years, right?
00:20:46.640 --> 00:20:49.200
You know, just to kind of refresh what we've done before.
00:20:49.519 --> 00:20:55.920
And that's something, even if you know I'm not thinking about selling until another three or so years out, it's just something in the back of my mind.
00:20:55.920 --> 00:21:01.039
Honestly, I find a little bit of fun to talk about my business with somebody like you.
00:21:01.039 --> 00:21:09.519
I have my head down in the activities and operations so much to actually take a step back and think about the business as its entity and what are the plans for that, you know.
00:21:09.759 --> 00:21:10.000
Right.
00:21:10.000 --> 00:21:12.799
And then like, wow, I can walk away with this much cash.
00:21:12.799 --> 00:21:13.039
Right.
00:21:13.039 --> 00:21:16.640
You know, that really does get the the wheels kind of turning, right?
00:21:16.640 --> 00:21:17.519
You know, so yep.
00:21:17.839 --> 00:21:23.440
And that's something too, you know, because hopefully there will be some kind of significant financial wealth event on the back end of this too.
00:21:23.440 --> 00:21:25.680
So just to kind of keep those dreams in mind as well.
00:21:25.680 --> 00:21:26.960
Right, exactly.
00:21:26.960 --> 00:21:37.599
And and Micah, you know, something that kind of comes to my mind too is just there's oftentimes things outside of our control, external factors we need to kind of keep a pulse on.
00:21:37.599 --> 00:21:40.880
Can you talk me through what some of those look like, what some of those are?
00:21:41.279 --> 00:21:46.400
Well, a lot of it, right, is on the legislative changes or regulatory changes.
00:21:46.400 --> 00:21:48.880
And legislative changes happen all the time.
00:21:48.880 --> 00:22:01.759
And you know, a good example is if I think capital gains rates are going to go up in 2028, maybe I'm really looking to structure a cell now and try to make sure that I'm maximizing on these lower capital gains rates.
00:22:01.759 --> 00:22:16.480
And again, that's something that's hard to plan for, and we see it happen, right, every four to eight years when you have changes in uh control at the at kind of the congressional level or at the White House level, and it's that steers policy, right?
00:22:16.480 --> 00:22:34.880
And so uh that's definitely something where you need to be and keep that in mind and are reaching out to us so we can help you advise you and say, yeah, we this is probably something that's gonna happen, or we think this is a something that we need to keep an eye on, and it might you might want to speed up your your sale.
00:22:34.880 --> 00:23:04.480
And then from you know, when we're dealing with private equity and hedge funds, uh there's always this the interest at the legislative level on carried interest and taxing uh trying to subject that to ordinary income rates, those the those those carries, as well as there's a lot of movement right now by the IRS to subject uh private equity owners and hedge fund owners to self-employment tax if they own, if they're operating through uh a limited partnership.
00:23:04.480 --> 00:23:08.240
So those are all the things that we try to keep an eye on from a tax perspective.
00:23:08.240 --> 00:23:09.599
And that's just the tax world.
00:23:09.599 --> 00:23:17.920
You know, outside of that, just recently we've seen legislation regarding home ownership and limiting the number of houses somebody can own.
00:23:17.920 --> 00:23:27.519
That really affects private equity, who were especially a lot of the private equity that was involved or interested in the single family unit rental business.
00:23:27.519 --> 00:23:32.720
And so now they are gonna have to change their strategy, right?
00:23:32.720 --> 00:23:35.759
Because just this legislation that just came out.
00:23:36.160 --> 00:23:39.519
And and that's where just there's it feels like there's so many moving targets.
00:23:39.519 --> 00:23:50.000
And and oftentimes it feels difficult when I'm trying to go it alone in terms of okay, if I try and plan three, four years out based on current regulations, are those regulations maybe gonna change?
00:23:50.319 --> 00:23:51.119
Right, right.
00:23:51.359 --> 00:23:52.160
So that's one more thing.
00:23:52.160 --> 00:23:53.759
Okay, Micah, I just need to give you a call.
00:23:55.279 --> 00:23:56.559
I mean, we see that all the time.
00:23:56.559 --> 00:24:01.680
But regulations change on a on a I mean, administration by administration basis.
00:24:01.680 --> 00:24:03.279
And that's and it's hard to keep up.
00:24:03.279 --> 00:24:09.440
It's so hard for business owners to keep up with all of these changes uh and plan and plan accordingly.
00:24:09.440 --> 00:24:16.160
You just can't plan when you don't know when there's no long-term uh policy.
00:24:16.480 --> 00:24:24.559
Well, Micah, I'm definitely gonna need to bring you back for just a more of a deep dive on planning generally when it comes to tax and other business considerations.
00:24:24.559 --> 00:24:33.440
Uh, but before I let you go on this episode, we just kind of do a favor for our audience and just what are some other thoughts you have in mind or last-minute advice or just a key takeaways you want to leave our audience with?
00:24:33.920 --> 00:24:40.720
If you're looking to acquire or looking to sell, the earlier we can get in, the better off you're gonna be from either perspective.
00:24:41.039 --> 00:24:41.359
Awesome.
00:24:41.359 --> 00:24:42.799
Well, Micah, thank you for joining me.
00:24:42.799 --> 00:24:45.440
I'll definitely be asking you back to the microphone again.
00:24:45.440 --> 00:24:47.680
And thank you to our audience for listening.
00:24:47.680 --> 00:24:58.480
If you have any follow-up questions about the business issues we discussed today or any other business challenges you're navigating, please don't hesitate to contact us at www.mjcpa.com.
