Observations from the Field

With the loosening of pandemic restrictions, we have been on the road visiting our clients, prospects and other market participants. Here are our quick takes on the hot button issues business owners are facing.

Potential Increases in Capital Gains Rates

We advise business owners routinely on the economic, operational and emotional aspects of selling their closely held or family business. There are many reasons to sell a business, but after-tax proceeds are generally at the top of the list for desired results.Among several proposed tax increases by the Biden Administration is an increase in the federal capital gains tax rate from 23.8% to 43.4%. Not surprisingly, business owners who were considering selling their business in the next few years are now focused on accomplishing that before these proposed capital gains tax rates go up. This tax proposal could translate to over a 25% negative impact on after-tax proceeds for a business owner—a business that often represents your life’s work. If you’re a business owner considering the sale of your business in the coming years, it is worth contemplating the myriad of risks associated with successfully operating a business for the additional years necessary to generate the sufficient earnings to breakeven if capital gains tax is increased—even if any increased rate is lower than 43.4%.

Although the Biden Administration’s tax proposal provides that the increase in capital gains tax will be retroactive to April 2021, our sources in Washington say that such a retroactive tax increase is highly unlikely. That said, a capital gains tax increase could go into effect beginning in 2022. To take advantage of current capital gains tax rates, business owners who are thinking of selling should start the process now to complete a transaction by the end of 2021. There are alternatives to a control sale of a business if you want to hedge your bets, which we would be happy to discuss with you.

How is the Market?

Another critical consideration for business owners looking to sell is matching their desired timing with the market cycle of valuation levels, interested buyers and earnings. Coming out of the pandemic we are seeing a “Double Rainbow” of high valuations (at or above pre-pandemic levels) and a continuing increase in dry powder among private equity investors looking for quality investment opportunities. The private equity market may not be your desired exit, but it generally serves to set the clearing price for sale transactions. As to earnings, many companies managed through the pandemic with limited earnings loss (even as many benefited), still buyers are being receptive to demonstrable pandemic add-backs.

chart Private Equity AUM Should Rise Sharply After 2021
Source: DCFS; The Deloitte Center for Financial Services analysis of Deloitte Economics, Preqin, S&P Capital IQ, IMF data, CBO; Congressional Budget Office and Financial Times
chart Private Equity Transactions Enterprise Value and Deals
Note: 2021 data are annualized. Source: GF Data®

Is Inflation Transitory and What Will Happen to Interest Rates?

Inflation is getting a lot of attention from business owners and market participants because everything seems to have gone up in price over the last 12 months. It has become harder to source supplies and products, including building materials, computer chips, rental cars, not to mention employees.

There are mixed views as to whether inflation will be a transitory phenomenon, but our consensus is that inflation is mostly pandemic induced and will abate as supply and demand come back into balance. In fact, our clients are noting that lumber prices are already coming back to pre-pandemic levels. Most business owners we talk to are doing everything possible to manage their rapid increase in costs; we also hear of many projects and purchases that don’t make economic sense at current prices being delayed or canceled. We expect this rational behavior, and the course of the steady beat of technological driven efficiency and the reduction in government stimulus payments, to calm inflationary pressures without the need for the Federal Reserve to raise interest rates aggressively.

In these times of political and economic uncertainty as we emerge from the pandemic, and with financial assets including stock markets, private equity purchase multiples and venture capital valuations at, or near, all-time highs, if you’re a business owner contemplating selling your business, it may make sense to do it before market conditions change and capital gains taxes increase—even though you’ll get only a 1.5% return for 10 years by investing the proceeds in a U.S. Treasury bond! Please give us a call if we can help you think through these considerations.

Recent Transactions

recent BB tombstones

Bengur Bryan Advises 3E, LLC


Bengur Bryan arranged $67.5 million in senior debt and preferred equity for 3E, LLC (the “Company”), a utilities service provider, to repurchase equity from a minority investor and refinance its debt to position it for growth.

Under the Benton-Georgia, LLC and Pipe Strong, LLC subsidiaries, 3E installs, inspects, maintains and replaces critical infrastructure for blue-chip, investor-owned natural gas utilities throughout the Southeast and Midwest regions. With history dating back to 1914, 3E enables utilities to reach their infrastructure goals and is well positioned to help its utility partners expand, improve maintenance and replace aging utility networks. The Company is a certified Minority Business Enterprise and is wholly owned by, a technology development, patent and private investment firm which has holdings in the data center, energy and financial services industries.

“The Bengur Bryan team served as an invaluable resource in structuring a transaction that allowed us to buy out our non-control equity partner and arrange a capital structure that sets up 3E to better serve our customers,” said Dale LeFebvre, founder of “The team expertly managed a complex multi-party transaction and negotiated numerous competing interests, allowing us to reclaim 100% of the equity ownership and position our Company for growth. We look forward to continuing our relationship with Bengur Bryan.”

“Scott, Pat and Charles at Bengur Bryan partnered with us to execute a complicated set of transactions with multiple parties on a very tight timeline,” said 3E Chief Financial Officer Jay Scherer. “The Bengur Bryan team was instrumental in supporting and preparing 3E for its next chapter of growth.”

2020 Year in Review

2020 began with only a hint of the disruption that COVID-19 would cause. As the pandemic spread, many of our clients’ companies were required to close or reduce their activities—severely in some cases. Many companies were faced with the challenge of simply staying afloat.

Our traditional M&A and capital markets deals were delayed, and we shifted gears to help our clients maneuver through these turbulent times. From helping our clients renegotiate loan agreements with their lenders, navigate the application process for new loan programs, such as the Payroll Protection Program (PPP) and Main Street programs, or seek capital from other sources to ensure they had enough cash to meet their fixed obligations and payroll, we offered advice and encouragement as needed. On a pro bono basis, we assisted over 50 businesses and non-profit charities to apply for a PPP loan.

In the first half of 2020, lenders and private equity firms mainly focused on their portfolio companies, resulting in little market activity. As the impact of COVID-19 on various industries became clearer however, companies that benefited from this changed environment—like janitorial services (Business Services) and quick service restaurants (Consumer Products & Services)—saw interest from both strategic and financial buyers.

A Few of Our Notable 2020 Transactions

Bengur Bryan represented Proximas Group with its purchase of ADG Creative, LLC, a leading strategic communications firm providing business-focused creative solutions for government agencies and commercial entities.

Bengur Bryan represented National Janitorial Solutions, a nationwide provider of janitorial services to a wide variety of retail, healthcare, industrial, office, and educational facilities operators, in its sale to Revolent Capital Solutions.

Bengur Bryan also served as the exclusive financial advisor to PJPA, LLC, a long-time Papa John’s Pizza franchisee, in the sale of its 18 New Jersey and Delaware restaurants. The sale attracted interest from franchisees looking to consolidate a territory to restaurant companies aiming to diversify their holdings. With the pandemic, quick service concepts, like Papa John’s Pizza, benefited from the shift to carryout and delivery options.

Our team is growing; we are pleased to have Patrick Frazier, Jeff Rummell, and Samantha Woolf join the Bengur Bryan team. As we look forward to 2021, we are optimistic that business activity across many industries will return to normal. As has been the case historically, a disruptive crisis creates both challenges and opportunities.

We continue to support our clients affected by COVID-19 and will be looking for merger and acquisition opportunities for companies that will benefit from industry shifts and the expected economic recovery. We thank you for your continued partnership and hope this new year brings you renewed health and success.