Even with a robust managed services and cloud computing market fueling demand, many MSPs are looking at the unthinkable...selling their companies. While such a drastic measure may have seemed unthinkable just a few short years ago, the uncertainty of federal and state tax burdens (here in the USA) are forcing some MSP business owners to seek a strategic sale or merger in order to avoid such a potentiallly high tax bill.
At the heart of the uncertainty is the US federal capital gains rates, which currently is at 15% and could potentially rise to more than 23% for some businesses. Those companies that are pass through tax entities, like LLCs and sub chapter S corporations, could realize those higher capital gains rates come January 1, 2013 if the existing rates are not extended. So, what is a MSP business owner to do?
MSPAlliance has seen a sharp increase in companies preparing their companies for sale going back as early as Q1 of this year. Now, the pressure is on to get deals done before the end of the calendar year in order to maximize their post tax dollars.
Other MSP owners are looking at the possible tax rate increases as an opportune time to capitalize on their other investments, of which many were significantly decreased due to the global economic problems of 2008-2009. Selling off a company, for some, is a good way to feather their retirement nest egg.
As always, MSPAlliance remains very positive about the next few years in managed services and cloud. On a global basis, the demand for these services from qualified providers will continue to increase. This positive trend, however, does not always negate the sometimes foolhardy and short sighted policies enacted by our political leaders. I guess that's why we have elections!
