While we haven’t seen them for over a decade, today’s competitive M&A market has driven Orkin, Terminix and Rentokil to consider stock purchase transactions — and in some instances actually do them.
Rollins, the parent-company of Orkin, purchased the stock of a C corporation in December of 2012 — a roughly $4 million transaction. Additionally, two of Potomac’s sell-side clients currently have Letters of Intent on the table from all three of the national acquirers, and most of the offers are for stock purchase treatment.
A stock purchase transaction has a dramatic impact on taxes — both for the seller as well as the buyer — and acquirers will typically shy away from stock purchase treatment. In fact, just 18 months ago, stock deals were almost unheard of in the industry (at least in the United States). For that reason, I wrote an article detailing how to mitigate taxes on the sale of a C corporation.
Although the good times are here again, I really don’t believe it will last. So if you own a C corporation, you should, first fire your current accountant and then either (1) convert the business to an S corporation or other flow-through entity (if you intend to hold onto it for at least another three years) or (2) if you intend to sell in the next 24 months, consider pulling the trigger immediately — by doing so, most of you will sell for far more now than you will in the future and the added tax savings accounts for over $1 million on a $3 million deal.
Please reach out to us if you would like a free consultation on planning for your exit from your pest control company.