M&A Market Still Solid
Written by James Sanders
The M&A Market thus far in 2025 has not waivered. As much as the press wants to write about uncertainty from Washington, it looks like deal makers want to execute on transactions. If you don’t buy it (pun intended), take a look at what some of the major deal advisors say:
• 2025 M&A Trends Survey Report | Deloitte US
• The top M&A trends for 2025 | McKinsey
• Looking Ahead to 2025: Preparing for What Comes Next | Bain & Company
• Global M&A industry trends: 2025 outlook | PwC
So, what does that mean for you as a business owner or leader? To start, I thought it would be good to revisit the basics of an acquisition and then provide some strategies that you might consider. For the next few weeks, we will cover the core concepts that may spur some thoughts on the M&A landscape.
Asset Transaction
Most of the transactions in the privately held business sector are asset transactions. The Buyer purchases just the assets of the Seller’s business. From a tax perspective, the Buyer will typically get a step up in basis on the value of the assets purchased, which helps with depreciation and amortization expense. The Seller, on the other hand, would be subject to both capital gains and ordinary income rates, depending on the mix of hard assets and intangible assets.
Stock Transaction
Stock transactions still do occur in the privately held business sector. Typically, these are done if the Seller has certain contracts with their customers that would have to be rebid in the event of an asset sale (i.e., the Selling entity must remain in existence post transaction). The Seller may also have some tax attributes which make it attractive (e.g. tax loss carry-forwards). From a tax standpoint, these are typically more advantageous for the Seller because the stock is subject to capital gains rates. The Buyer on the other hand typically does not get as much of an advantage because they are only buying the stock and the asset values of the Seller remain on the books as normal (i.e., no step up in basis).
Merger
In a merger, two separate entities merge together (or merge their assets together) and form a new entity. From a tax perspective, mergers present a lot of different scenarios. I could write about all them in this update, but I think they are a good topics for the coming updates.
If you are saying to yourself: Asset Sale, Stock Sale, Merger…..my head hurts! Don’t worry, your business professional advisors (business accountants, business attorneys, business financial advisors, etc…..and yes, I meant to add business in front of each profession) can help with the process.