The Exit Engine Podcast 17: Life in the Business Universe Post Election

Welcome to the ExitEngine Podcast, Episode 18. Good morning, John.

Joe, how are you today?

Doing excellent, man. Doing excellent. It's a, uh, we have, we have put the election Pretty much behind us.

Yes, it is. It's a good thing for business because there's certainty.

That's exactly right. Where, where, where on Monday there was— on Tuesday there was a very— a lot of uncertainty, a lot of holdup, a lot of things not moving. Uh, things kind of felt like they were like in a holding pattern for a while. And now the election, and of course the day after the election, the stock market shoots up and, uh, you know, everything is basically feeling like, uh, there's been a release at least, right? So now we've— now a decision has been made, and now we know— now we know who we're— what we're dealing with, right?

Yeah. And that's why the stock market went crazy. I mean, yes, the stock market— I think many of the people in the stock market, um, liked the outcome of the election, the person who won. I think more importantly, they liked the fact that it's certainly happening, right? That Trump is president. He will be there for the next 4 years. The bond market had a slightly different reaction because of Some of the proposals that he's talked about, we have no idea if he's going to implement those. But but the reason I think that the bond market went down yesterday and interest rates went up is because some of his policies, his tax policies may the thinking is that may cause inflation or inflation to persist. Now again, I'm not making a value judgment here. I'm just saying that's that's what my interpretation of and some other people's interpretation of. What happened when the stock market went up and the bond market went down yesterday?

No, absolutely. And of course, there's all kinds of potential issues with things in the way that government programs or departments or reorganization or elimination of things. And we have no idea how they're going to treat the Fed, which is supposed to be an independent organization right now. Like, who knows? Right now, there are some things that are up in the air. So let's talk about the M&A market in particular.

Okay?

And we'll talk about exactly what we see and what we kind of forecast is to be both the good and potentially the bad. So let's look at first, let's talk about some of the things that we think that, uh, you know, a, a, a, a Trump administration will be, how it will be good for businesses who want to sell, right? And the first thing obviously is that the very first thing is I think some of the worry that we, we have, we have talked before about the silver tsunami, John, right?

Yes.

And, and the fact that the silver tsunami that we were expecting, which again, to reiterate, is the idea that there were all these baby boomer business owners who all at once are going to transfer all this wealth to the next generation or to new buyers or new owners. So, the idea was that because of the sheer volume of baby boomer business owners, that there was going to be a large transition of wealth. We had not seen that heretofore, not in any major way. And one of the expectations about that was that there had been some that the Democratic side of things had proposed, had floated some pretty significant tax situations that were going to potentially adversely affect, uh, people who were— had businesses that were worth a lot of money. So those 2 things were the capital gain, whether the proposed capital gains increase, and of course the tax on people making more than $400,000 a year. So those 2 big, uh, Democratic platforms potentially were holding people back. The, the, the idea here that those— is that those things will not happen now.

Right, right, exactly. Tax policy. Um, and we, we, you know, we talk to business brokers all the time. I actually was talking to one, um, before the election. Was that before the election? Yeah, it was Tuesday. And he was, he was stating to me and saying to me that many of his potential sellers were waiting on the sidelines because they didn't want to sell their company. They weren't sure they wanted to sell their companies. They wanted to sell their companies in the next couple of years, but they didn't know if they could afford to do it if some of the proposals on one or the other side were implemented. And so, you know, again, it's— we're not making judgments about who won. But we've been hearing from these business brokers and companies directly that in the current administration that will take office in January, it will be a much more friendly environment for sellers because of those tax policies you mentioned.

Exactly right. And I think that there's the— what we're hoping will happen then, there'll be a relaxation kind of effect, right? It'll be like, okay, now I can really kind of look, examine what I can do here and the money that I can make and the money I can home from selling my business and stuff like that, and I won't, I won't have to worry about an increase in capital gains tax. So one of the other things we think will happen that tends to be something that happens with the Republican side is the deregulation, right? Removing regulations and streamlining things to make it easier for business to operate, right?

Yeah. And Elon Musk has been at the forefront of this activity that the Trump administration has talked about. Is he is going to go in and he's talked about his experience in California with all the regulations and how long it takes things, how long it takes him to, you know, get rockets up. And he's moved his operation, many of his operations, or a lot of his operations, from California to Texas because of more business-friendly environment. And I think what he's going to end up looking at is federal regulation that he believes doesn't add any value or protect any interests. And Will there be some? Certainly there will be some. Will there be some probably that he's gonna try to repeal that do have, you know, good reasons to be there? Yeah. But I guess he's gonna cross that bridge. And, and in essence, as you said, the Republicans are strongly looking at these regulations to say, do these make sense going forward? Maybe they made sense in the past, but can we, can we unleash business in this country with fewer regulations?

Absolutely. I think that on top of that, the ability— there are going to be certain regulations, especially around, you know, potentially around the environment. There's going to be certain regulations that, again, besides the red tape cutting, I think you're going to actually see potentially a lot of actually like the removal of certain regulations and potentially even like entire departments of the government that were responsible for those regulations.

So, uh, And in addition, you know, and we're not, you know, we, we sort of look at the larger mergers and acquisitions in, you know, that happen in Wall Street. We're not really dealing with those very much, but, but when you have those, those mergers and acquisitions that occur across either industries or within industries that consolidate large companies together, the 3 and 4 player, the 2 and 3 player, the 5 and 3 player, Again, in general, those types of things will go forward more, uh, more, will more likely go forward in the future administration as opposed to some of the things that Biden has done in the last 4 years of stopping those big mergers from happening.

Right. Now, now they both have this interesting thing is that they're on both sides of the coin. There was a, there's a, uh, antitrust situation going on.

Sure.

Right. And so as, as, as hawkish as Biden was on that stuff or whatever, I think you're gonna see a situation here where there's a potential issue. Okay, with especially in the tech technology, the medical field, media, where, where potentially there, there, there will be a stricter antitrust enforcement and things like that from the, from a Trump administration. So the reality is, is that it's actually one of the things that's kind of like up in the air, right?

Yeah.

Until we see that policy and things like that, the, the, the ability for large tech companies and things like that to merge into one and things like that could be, you know, again, It's a matter of, you know, I don't know what if it's a matter of, it might be a matter of how these media companies have treated him, you know.

Well, yeah. And it's, and it's a matter of the concepts, right, that he talked about in one of the debates. He talked about a concept for things and, and, uh, what that concept turns into, you know, or sorry, how that concept turns into policy or proposed policy. So yeah, I mean, a lot of uncertainty. We don't know. He said a lot of things in the campaign. We shall see what happens. But in general, I think we can all agree that it will be a more business-friendly environment. Yeah. On balance.

No question about it.

Yeah.

No question about it. And I think the stock market and that kind of thing, which is such a big part of this stuff, is going to be obviously going to be something that's going to be, especially in the short term, we're already seeing that stock market performance. Right. As you said, it's a matter of— yeah, go ahead. No, no.

And the important thing is we always emphasize this and we talk about this all the time in all of our podcasts. But we have to say it is politics will be politics and the business environment is a business environment. But nothing's preventing you who's listening to this as a business owner from preparing your business for sale, because preparing your business for sale will not drastically change no matter who's in office. Sure, it'll change at the margins. Tax policy will change, some regulations will change, but you can control the things you can control. You can't control the president, you can't control the Congress. You can control the things that go on in your business and how you want your business to change in the next 30, 60, 90, 120 days, because you can control those things.

That's exactly right. And I think that it's a matter of, as we always talk about, you know, being able to put be able to find a buyer for your company is going to be much easier when your company is buttoned up from the beginning. So no tax policy, no, you know, no specific, you know, kind of reaction from the stock market, right? No US-China trade relations situation or whatever, you know, or unless of course you're directly involved in importing things, which we should talk about because the tariff thing, you know, could be an issue on both ways. The ability, the idea here is that you have The clarity now to know who's going to be in charge, okay, and the ability now to move forward in a way in which— and again, as John said, probably a very much more business-friendly situation, okay? And so the point is that there's no excuse now.

Correct. Yes, that's the best way to put it, Joe.

You got to know now that now is the time, okay? It's not going to get any better, all right? If you are a baby boomer situation and you are looking to retire and looking to sell your business to retire, there's never been a better time than right this second.

Right. Because, right. Yeah. Because as Joe mentioned earlier, the silver tsunami that we thought was going to happen 8, 9, 10 years ago hasn't materialized. But this, I think, I really do believe that this period in the next 4 years will be a tremendous opportunity for baby boomers. They weren't going to sell at 65, but now that they're 75 and now that they're getting a little bit older and they really see that, they truly see the writing on the wall and they want to get out of the business, this is the time to prepare so that you can sell your business for the maximum amount of money, uh, in the next couple of years.

Right. And, and, but you'll still need to do the work of preparing your business for sale to maximize and optimize that value.

Right.

And so understand that this is not— the change of administration is not going to make it— is going to make it a little bit easier for businesses to sell, right? It's going to make it a little bit easier. It's going to maybe open up some other buyers to a market that we may not have been open to. You may not heretofore been open to. It may You know, money, what we don't know is the way that interest rates are going to potentially go. We're not, you know, if we look at the bond market, again, that's one of the things that makes us a little bit nervous because, again, we don't know how the Fed is going to be treated, how that's going to go moving forward and things like that. So, that's a little bit kind of up in the air. But in general, we should see the ability for people to be able to borrow money, which is good for selling businesses because buyers often are going to be using other people's money to do that. And so, that should be a good thing. However, the word of warning is this, okay, that the Donald Trump being president isn't going to make your business sell any better if you are not realistic about what your business is, what it does, what its value is, and what its value can be.

Yeah, okay, exactly. In any— in, in all business environments, a better way to put it is If you have steady cash flow and you have a diverse and strong customer base, your company will sell for a premium, full stop, no matter who is president.

That's exactly right. And so what you're now emotional or the worry or the uncertainty or whatever can now hopefully be put behind us. Okay? Now we have clarity. We know what the direction we're heading. there's no reason now to hold back, right? Now we're in a situation where if you can do the work of examining your business, if you can do the, right, if you can do the, if you could do the hard thing of being able to realistically look at your business and what it might and what it is, not only what its value is, but its propensity to sell, its sellability, right? And examine those things. And now's the time to be able to optimize and maximize that stuff. For a sale in 2025, right? It's, it's, there's never been a better time than literally right this second, right? Because, because of the fact that we've got clarity, because we're in a situation where, again, it will take some time for things to, you know, to change, right?

Yep.

If the things that need to change, it will take some time. The, uh, but the, but, but some of the things that are, are being prevented from happening just by Trump being elected is what's— is the advantage right now, i.e., you know, the tax situation primarily. Right.

Yeah. And the other interesting thing that I'm just thinking about is today, you know, or the administrations are transitioning. Right. It's going to go from Biden to Trump. This is a perfect time in the next 60 days. Right. The inauguration will happen in January. We're taping this in November. But these are the next 60 days or next 90 days, frankly, are a wonderful time where the holidays come in. You, you know, depending on what your business is and where you're— if it's cyclical or seasonal or whatever it happens to be, this might be a time where you have more opportunity to work on your business instead of in your business and work on the things that, you know, you know, as a business owner, I know as a business owner, right, there are things that I need to do and I need to improve and I need to work on that I put off. And I do it random times when I'm watching an NBA game or something at night, like I was doing last night. The next 60 days are a great opportunity while things are transitioning. Look at your business, see what you can improve. You know, don't even think about what, what, what, what the new administration is going to bring in. But you know those things in your business that maybe you need to spend more time on your books. Yes, like, like I do. Maybe you need to Work on your management team. Maybe you need to talk to your team. Maybe you need to elevate people at the end of the year, pay bonuses, whatever it happens to be. It's a great time to look at your business for improvements to match the transition that's going on in Washington. Transition your business from almost ready for sale to fully ready for sale.

Absolutely right. Yep, no question about it. I think, again, it's this— the uncertainty is what's been holding people back. I don't want to get into a situation where suddenly I've got a capital gains issue or whatever. It's already high enough, people will say. You want to make sure that— again, and the tax planning thing, we can never say enough, right? I mean, we had Phil Hannes, our wealth manager, guest on a couple of weeks ago. And again, not so much about the tax stuff, but about wealth management and the ability to be able to create a plan around taxes. And what's going to happen when you get this giant windfall of money is all part and parcel of your exit planning strategy, right? So, The ability now to be able to know that you're not going to be facing potentially, you know, any kind of significant hike in tax liability is a good thing. Take that probably to the bank, you know, I think, and be able to prepare your business right now for what's going to happen. Now, there are some going to be some specific industry type things that are going to be affected one way or the other. And let's talk a minute about this idea, Trump's idea about the tariffs. thing. That this happened, he did do this his last time around. And we should probably unpack that a little bit because, again, if you are in a business right now that relies on importing things from other countries, and if it relies on importing things, especially from places like China and things like that, then we're potentially going to see a tariff situation that could end up costing you as the business owner a little bit more money than you're used to spending.

Yeah, I mean, because, you know, forget the rhetoric. Again, we're neutral here at ExitEngine, but tariffs are inflationary by definition, right? They're borne— the costs are borne by the company that's importing the goods into the country. And ultimately, those companies are going to pass what they have to pay in tariffs onto their consumers. So they'll raise prices. They'll, um, in, in, in the vast majority of cases, um, when a company is passed along prices, they will pass those along to their consumers. I can't really think of examples when they don't do that. So—

Right.

What we, what we hope for is that we get clarity around where those tariffs will be. Will they be strategic tariffs? Will they be limited to certain areas? I know the European Union—I heard something on the news this morning about the European Union was talking about, was going to wanted to talk about not having tariffs on European goods and only having them on other goods around the around the world. I don't know how that would fly or that would meet with what they're going to do. But but by definition, those things are are aren't tariffs or inflation as well as tax cuts. And I know we talk about tax cuts. A little bit, but, you know, if they were to implement tax cuts— this isn't John Kniff or Jo Stapleton saying this, this is the bond market and all the traders saying, well, if those tax cuts go through and the deficit goes up, um, well, that is going to have a negative, a negative effect, uh, bond prices and interest rates will go higher. And they did. I haven't looked today, but, um, but that hap— that was happening yesterday. And that will be bad for industries like the housing market, right? If interest rates stay high, mortgage rates will stay high, and fewer people will want to trade their 3% mortgage for a 6% mortgage.

It'll directly affect the M&A market because, again, you've got a lot of buyers out there who need to borrow money to be able to do this. And those rates— but we're already in a situation right now where the rates were— the rates haven't gone up in the last couple of years. We're, we're, you know, negatively impacting— that's one of the major factors that we're, that we're seeing in this, in the, in the M&A, the mid-market M&A space overall.

Yeah. And, and that's a bit— that's a much more salient point than I mentioned about housing. Business borrowing, um, again, those are based on interest rates as well, what you can borrow money for. And, and with those going higher, it'll be tougher for people to finance. Like, you know, our friend that we were talking to a couple of weeks ago um, lenders, you know, might not want to borrow at the EBITDA rates that he was talking about, uh, when we were talking to him. So if, if all of a sudden lenders will say, okay, we'll borrow— we'll, we'll lend against, excuse me, uh, 25% of EBITDA now, and they all of a sudden go to 15% of EBITDA or lower than that, well, that's going to be a problem for people like, like him financing deals.

Right.

And that, that, that problem that he experiences is a model that's very similar to other private equity firms is They use some of their money certainly, but they borrow a large portion of the money. And if that money's more expensive, guess what's going to happen? They're going to be, A, more discerning about who they're buying, and B, they're going to borrow less because it's going to cost them more when they do so, right?

So therefore, the lesson here, guys, again, is we're going to go right back to the same thing, which is that do the work of buttoning up everything, okay? Because when you do that and you really prepare your company for sale, this is exactly the kind of thing that will help you when you are— look, the private equity companies, and we're talking about private equity specifically, but again, there are even the strategic buyers and things like that this potentially affects, because anybody who's going to borrow money to do anything potentially could be negatively impacted by this. But the thought here is that you are— if you are the buttoned-up company that has everything, all the ducks in a row, and you're easy to work with and you're ready to go, and the valuation valuation can be agreed upon and blah, blah, blah, you are going to be the company that's gonna be selected over somebody else, right? By the same buyer.

Right.

So the, the, the, again, be the, the, it's, this is the, the, the tariff thing does not necessarily, or, or, or the bond market or, or the, you know, the, the, the interest rates don't necessarily impact you from say, oh, well, you're not gonna be able to sell your business. But what it does is it make it re— it, it increases the importance of your business being buttoned up. So that those private equity companies who have to spend this money, okay, whether or not the interest rates, no matter where the interest rates are, okay, the, the, the private equity groups have to spend the money they've collected, right? That's their whole—

Yeah, that's their mandate, right? And again, not to get into too much of private equity, but a lot of these private equity special vehicles are created with a, with a, most of them I should say, are created with a time limit in mind, right? A 3, a 5, a 7-year fund, and they have to They have to invest in companies, and then they have to return their money to investors because the investors want a return. What no one wants is a piece of an illiquid company that has some undefined amount of term that they're going to tie their money up with.

That's right. So what about things like US-China relations and things like that? Right. So where do we think we kind of— where does that kind of net out? Obviously, there's a very obviously anti-China situation, right? But the supply chains. So I think about things like, you know, the obvious examples, you look on Amazon, right? And Amazon, that everything is coming from China, right? I mean, almost everything. It's kind of insane, right?

Yep.

As much as talk there is about anti-China, anti-China, China's terrible, whatever, we certainly buy a lot of product from China, right? And obviously, we imagine that that's going to be a primary target for tariffs, right?

Right. And especially with the dollar being stronger, right? Trump has talked about wanting a stronger dollar. He sort of inadvertently, or indirectly, I should say, the dollar jumped when it was clear he was going to be elected. That has effects on trade. We're not going to get into all of those effects, but yes. the various and specific relationships with China because they are a supplier of so many of the raw materials and so many of the goods that are purchased by American consumers that will potentially have tariffs either extended to them or have tariffs currently. So, yeah, that's a big uncertainty.

And not just directly to consumers, but I mean, businesses buying supply chain stuff too. Right. So the reality is that, look, again, let's bring this right back to how this affects the value of your business. Okay, if you are a business that imports anything from China for supply purposes, as ingredients and things, whether you're manufacturing or whether you're, you know, or whether you're just, uh, you know, whether you're selling things or putting things together for, you know, um, the idea here is that, um, those— the cost of those goods is probably going to go up.

Correct. And there's nothing you can do about it, right? If there's a tariff on stuff, if this isn't a This isn't a supply chain thing. Maybe you can source the materials from somewhere else. Okay, that's an option. But if your, if your main suppliers are in China and you have 2 or 3 of them, you're not going to find a way to avoid the tariffs. Trust me.

Right. And so the point is though, that, that raises that, that potentially, you know, again, if you have— it raises your costs, right? So now your profitability is going down. You're— now what you have to do is you have to raise the prices. You have to raise your price to your frontline consumers in order to basically be able to pick up that cost to maintain your profitability and that kind of thing. That obviously can have negative repercussions on your top-line revenue. So now you're in a situation where if you were in growth mode, what you don't want to have happen is we don't want to have interest rates be so high and have these tariffs where I have to— there could be a bad combination of things. So in other words, again, things to look out for would be a bad combination of high interest rates and tariffs, and potentially some kind of interest rate unpredictability or something like that. That would be something that could put another kind of kibosh on the M&A market in the near future.

Yeah. And again, these private equity firms that are looking at your businesses and even strategic buyers or buyers They're gonna get opinions from bankers, and the bankers are gonna bring up all these things. So the more that you can have buttoned up in your business, again, the stuff that you control that Joe mentioned earlier, if you— the stuff you can control, and the stuff I mentioned earlier is like, control the things you can control and have a plan for what happens if interest rates go up, what happens if these tariffs stay in place, if it affects you, regulatory changes. These are the times to pay attention to the news. You know, people were paying attention to the election. A lot of that was just noise, and really we just had to get to the election. It's like all the coverage before a football game. Like, I can't even watch any of it. I watch the game from 1 to 4 is when I watch. I don't watch from 11:30 to 1.

Right.

But now is the time. This is the game, right? This is where the news is actually useful now because the election's behind you, and it's what is this government going to do? Because it talked about a lot of things. Again, not making any judgments, but they talked about a lot of things, and implementing all of them could cause some— a little bit of uncertainty for business, which I know is not what they want. So I think that they're going to be selective and pick and choose and really listen to the business community in a way that, um, will be good, I think, for M&A and just business in general.

Absolutely. So what about the focus on manufacturing? One of the objectives behind the tariff situation is to spur, or should be to spur, US manufacturing. So potentially, how do we think that potentially affects things for current sellers right now?

Yeah, I mean, I think to a degree, that's what what the tariffs are, are designed, um, to— sorry, the better way to put it, the— what Trump is going to do is he wants to encourage domestic manufacturing and making things in this country as opposed to importing them from overseas, which is what— which, which the tariffs are on those things by definition. So yes, I think to the extent that he has programs where he encourages domestic manufacturing, you do it through tax incentives or grants or anything like that. I think that is definitely in the cards and people hope that's in the cards for big domestic manufacturers.

And the reality is that from the economy of scale thing or whatever, the reality that could actually spur M&A activity in the manufacturing sector. So potentially, if you are a manufacturing firm, And, you know, the ability that this prioritization of American manufacturing as opposed to, you know, outsourced stuff could potentially be a boon for you if you're in the manufacturing space of any kind. It could help, could improve supply chain, could improve supply chain timing, right?

Yeah.

If more manufacturing happening of these smaller component pieces and things like that inside America as opposed to having to worry about The literal slow boat from China, right?

Yeah. And also a lot of the manufacturing that, that, uh, that takes place in the US is higher-end manufacturing and, and uses like a lot of, a lot of robots, a lot of robotics, a lot of new technology. And I would think that if I were in Trump's shoes and I wanted to encourage and spur domestic manufacturing, I would try to use higher-end technologies and not try to compete with China in the lower-end manufacturing is I would rather— I would focus on higher-end manufacturing processes and things that can be done with a lot of robotics and certainly people. But you got to create—

it's going to be about economies of scale, right? And being able to diversify supply chains and things like that. The way that you reduce those costs, right? In any kind of way of having manufacturing It's the labor cost in America that's the issue, right? That's just plain— plainly say it. That is why the outsourcing has happened over the past, right?

Exactly correct.

The manufacturing stays here if you can create efficiencies with technology, if you can create economies of scale, if you can diversify supply chains and have different vendors for things competing each other for your business and things like that. That's the way that you're going to offset the cost of the labor that would obviously come with that. But I think, again, the overall focus by this administration on US manufacturing is going to be good overall for—

Yeah. And assembling things, right? Manufacturing used to mean a lot of different things in a lot of different— it was making things here. A lot of the manufacturing now that happens is the assembly of the car or the product here. The creation may happen overseas, but, um, uh, the assembly happens at plants, you know, all throughout the South in automobiles and those types of things.

Absolutely. Yeah. What about defense? The defense, defense, uh, side of things? Uh, uh, energy. Defense and energy probably want to be 2 of the biggest, uh, you know, situations that are gonna, you know, probably improve Right, in terms of sectors.

Yeah, again, I, I— funny, I was listening to something on the radio this morning and they were talking about how the Pentagon still can't do an audit of all the programs. And, and there's been all sorts of examples that you can watch, you see on, on various TV shows about that, that the, the defense system was— took twice as long, cost twice as much, and delivered half as much. And I thought that was a good way to put it. It was a good soundbite, but but it's true, right? So what I think is if if if they're going to make government more efficient and they're going to root out some of the the waste fraud and abuse that they've talked about, a lot of that is waste, right? I don't think a lot of it is fraud. I don't think a lot of it's abuse. But but if but if if they can figure out a way to make things that the army needs and and and align the defense contractors. With what the Army requires for the future fighting needs, then I'm then then I think we should all be for it. But that's gonna but but what that's gonna do is that's gonna realign the more efficient defense manufacturers and and you know people people that make planes like like Boeing and those types of things could be in a little bit of trouble because while they've always got airline contracts and those types of big contracts. Those might dry up in the future if, if the government is really gonna be concerned with getting, getting value for what they spend. 'Cause we spend billions of dollars in defense every year. Right. And, and this could be a very good thing for rooting out that waste that happens, I think, in, in a lot of the contracts.

I think, but physically, I mean, not, not specifically, not physically, specifically in the defense, defense And the energy sector is potentially the— there's going to be a lot of potential for a lot of consolidation, right?

Yeah, exactly. From an M&A perspective, you're exactly right. I think that there's going to be some— there's going to be some businesses that, that go across industries. There's going to be, you know, what's going to happen with, you know, oil and gas in the future. Um, and some of the, um, some of the niche players will probably get purchased along the way because the other firms see opportunity in in places where oil costs a lot of money, as an example, to extract from the ground, that might change as oil prices go up or down.

So generally be favorable conditions in that you have to assume there'd be generally favorable conditions in those sectors. And so as a result, then you're going to see a rise in M&A activity in those sectors. And those sectors are already very popular and very desired, especially by private equity firms. Those 2 spaces, manufacturing is to a degree as well. But we also know that a good manufacturing company in the United States is hard to come by. The other things that I was thinking about the other day was, as we were going through this election, is when we talk about the regulatory situation, Like the long-term proposition for businesses about deregulation and being able to loosen the restrictions on certain things, the environmental regulations as one example. I'm sure there are plenty of others, mostly seen as a positive, right, for businesses. The problem is that actually there's a problem in the transition of this stuff. So in other words, if you are a company deregulation is going to look relatively positive for you depending on what exactly industry it is. But for the most part, the problem could be is that in the speed in which the deregulation happens and in the uncertainty it creates in the transition. So in other words, if you're in a situation where the regulatory things affect your business directly, if you get into a situation where The environment changes too quickly, or you might be in a situation where it might be difficult to sell your business because of the uncertainty and the risk of the— like, is this business in compliance? Is it out of compliance? Is it a situation where the rule changes make it ambiguous about whether or not this is a good situation for an acquisition? Right? So when we look at just a, just a cautionary thing about, about regulatory rollbacks is that it's fine once those rollbacks are completed and done, because it's like anything else, you know where you stand. The problem will come in with, in terms of the transition of stuff while people, well, especially buyers wait until these things, you know, where they see these things go before they can make an acquisition because of the the flux of a company could be in or out of compliance, and you may not know whether it's solid or not. And that could be, again, I'm going to move on to somebody else who is, you know, who's more—

Yeah, like, right, like all these— there's all this sort of data privacy thing that's going on, right, that has been going on for a long time. And some of the companies in that space, I mean, we have different rules than in the European Union, but But as an example, and I don't know if this is going to happen, but I would imagine that some of the data privacy laws could be modified. And I know that that's happened in the recent past. So that might be one of the things where if you're a data broker or you're someone that's tasked with protecting the identities of all these people, we all hear about these breaches. That's something that could be adjusted if in the future. And obviously artificial intelligence is another one that That, yeah, while there's very little regulation now.

So what about labor unions? The employment, the right labor in America. We talk about, again, trying to, you know, spur manufacturing here. We know that one of the things, one of the issues that, that's affected the manufacturing here is the cost of labor here and all that stuff. So, you know, what's been interesting is that, you know, Biden, obviously, you know, Democrat, has been very heavily, you know, uh, Labor union oriented, obviously did a lot for the US autoworkers and things like that. What do we think happens in terms of labor under a Trump administration?

Gosh, I wish I knew, and I wish I had something very intelligent to say, but I think, again, it's uncertain in the future because I think he got a lot of support from, from labor union members. I think labor union leadership was not supportive of his policies, but I think that, that, uh, they probably will have to change their tune because so many of their members were— did vote, did end up voting for him, just like a majority of the, you know, majority of voters did too. Um, so, so I would like to think that they will probably, uh, change their policies and, and, and be more— or, or, or Donald Trump will have a closer relationship with labor unions than actually we probably think, because he sort of has to have that relationship.

Right. Yeah, no, you're probably right. And again, something has to change there because otherwise you can't both try to bring back manufacturing and the whole thing and also have high labor costs. Right. I mean, that's been the problem for so long. I don't know. We'll see how he addresses that. But you're right. So a little bit of uncertainty there. Pharmaceuticals is another space in the whole thing that I think, uh, you know, has come up during the campaign and stuff like that. Um, is Robert F. Kennedy Jr. gonna be, uh, you know, involved in this, uh, thing in a cabinet position potentially? Uh, you know, what happens there? There's a—

You know, I think, I think healthcare too, healthcare in general, including pharmaceuticals, and I know it's obviously those are different things, but, you know, he has talked about getting rid of Obamacare. He's talked about replacing it. I think, I think that was actually what he said was a concept of a plan in his mind during the debate.

Right.

Um, so who knows? Who knows what will happen? That when he tried to get rid of Obamacare in the past, it failed. Maybe he has a more, uh, um, compliant, uh, Congress to— in which to do that. But I don't think what will happen is I don't think he will actually replace Obamacare without a plan of his own, because just to get rid of something, I think, would be politically poor for the Republicans who have to run again. Maybe I'm wrong. And then with pharmaceuticals, I think pharmaceuticals just, you know, they sort of hum along with large profit margins and, you know, solving drug problems for people with, you know, with their rare diseases. or widespread diseases. So I think the pharmaceutical industry will probably be fine. I think the healthcare industry specifically could be one of those industries that goes through sort of that change we were talking about before, right? It's that regulatory uncertainty that—

Right.

Something's going to happen. There'll be a transition period, and they'll have to adjust to it, right? I think they, with regard to the plans that were on some of the exchanges before, They weren't great at the beginning, but I think they've gotten better. And there's new companies that have really thrived in offering plans directly to consumers as opposed to the more traditional through your employers.

Right. So look, I mean, the bottom line here is that we should look at this, be looking, all of us in this industry right now in the M&A space should be looking at this time as a very fruitful time. We should be excited. Expecting an uptick in, in the, in what has been a relatively slow market over the last few years in general. Obviously there are individual spaces that do better than others, but the idea is that overall we should see a giant uptick. We should start seeing some release, uh, you know, so to speak, of this silver tsunami happening. Um, we should be in a relatively friendly environment for people to be able to grow businesses, um, you know, to be able to grow revenue And to be able to, you know, and again, with things like AI and all that stuff, again, regardless of the political situation, there are ways in which you can be right now increasing the value of your business by doing the things that we know have to be done no matter who the president is, right? We have to be able to make sure that we have, you know, a business that is buttoned up, that is profitable. We have to make sure that we've got a business that has good economies of scale, that is doing a good job in terms of of an operation that is efficient. We want to make sure that we have an owner that is, again, removed somewhat from the business, you know, as well. So again, all the things that we talk about all the time still apply here, right?

Yep, exactly.

And so, and in fact, what we should be looking for is— but now I think the big thing is, but now it's time. Okay, so what we're going to say, our recommendation to everybody out there, and everybody out there, is that there's never going to be a better time to sell your business than right now. Maybe, maybe 2017.

Yeah. And again, that might— when we say now, that's probably not going to be by the end of the year if you're starting now.

I meant 2025, right?

Yeah, exactly. Yeah, I know you meant that. But, but so, but, but the preparation, as we talk about the preparation for selling your business, it's not something that you, that you turn around and say, I'm going to sell this next month or even in 2 months, especially around the holidays. But It is something that you can do and prepare to do and think about what you need to do in order to sell your business. But 2025, 2026 is gonna be a great environment for it.

No, absolutely right. And it's gonna be, again, there's gonna be some things to look out for. Obviously, certain sectors, I wouldn't wanna be in the wind industry right now, but things like that. But alternative energy probably gonna take a hit. But again, but your oil and gas, you're gonna have a field day, right?

Exactly.

So, again, industry by industry, we'd have to look at that as an example. But again, what you want, no matter what industry you're in, is that you want interest rates to be relatively low for yourself and for buyers of your company, right? You want the regulation to be relatively low and you want to get through those transitions as soon as possible so that you have certainty around those regulations. You want to be able to— obviously, we know that the tax policy is going to be favorable that way for the most part, until, again, until we get into a situation in which these inflationary situations happen that we all have to look out for as well. So, again, a good solid, you know, if you're the founder of a business and you're in a situation where you've been thinking about selling, And you've been maybe holding back because of the uncertainty, that uncertainty is as over as it's gonna be, right? There's gonna be uncertain things still, but that's why, again, the idea is to get in there now, get your business prepared, and make a plan to sell in 2025, 2026. That is our— that's our official advice right now.

Agreed.

So anyway, this is the Exit Engine Podcast. My name is Joe Stapleton. That is John Kniff. We are here every Friday with you talking about mid-market mergers and acquisitions, how to increase the value of your business and saleability. And so hopefully you enjoyed this episode. It's gonna be an interesting situation. We are looking forward to a lot more volume, a lot more activity in this space, and hoping that people— we're gonna turn some business owners into some multimillionaires. Who are going to now be able to take their life's work and turn it into some relaxation, maybe, or maybe the next big thing, whatever you want to do. So you can get— you can follow us along at myexitengine.com. We're here at the Exit Engine Podcast wherever you get podcasts. As you know, we are available on LinkedIn all the time. You can send us an email whenever you want to info@myexitengine.com, and we will get back to you. But please comment and like and share. And get this to a business owner that you love. Somebody, uh, and the more, again, the more you prepare, the earlier you prepare, the better chance you are to maximize the value and therefore the, and salability of your business. That's what Exit Engine is all about. John, great discussion today. Thanks a lot, man.

Thanks, Joe. Have a good rest of the day.

You too, bud. All right, talk to you later.