For 110 years, four generations of Mills family members earned their money by expanding their great-grandfather’s Chicago apron business into a medical supplier that ranked among the nation’s largest private companies.
But soon after Democrats turned their attention toward raising taxes for the wealthy this year, the family signed a deal to cash out billions.
It was no coincidence, according to people close to the more-than $30 billion transaction, which sold part of Medline Industries Inc. to a consortium of Wall Street investors in the health-care industry’s biggest leveraged buyout. The threat of subjecting billions in proceeds to additional capital gains taxes motivated the clan to get it done before the end of 2021, when higher rates could take effect, the people said.
Such maneuvers are suddenly in the works throughout the opaque world of private U.S. corporations, as founders and their offspring discreetly consult tax experts and bankers with a pointed question: How much might they save by selling quickly?
Suddenly, in just a matter of a few months, the vast dealmaking machinery that caters to wealthy entrepreneurs has started buzzing with a level of activity that some industry veterans say they haven’t seen before, potentially setting up a cascade of sales for later this year. A combination of high valuations on companies and potentially higher taxes in the future is proving to be a potent motivator.
A spokesperson for the Mills family didn’t respond to messages seeking comment on the role taxes played in the deal—a motive that hasn’t been reported before. Earlier this month, the Chicago Tribune quoted Medline President Andy Mills as saying the goal of the sale was to strengthen the business while unlocking cash for family members whose net worth was tied up in it. About 20 to 30 of them will benefit.
The family may be worth about $30 billion, according to the Bloomberg Billionaires Index.
Many scenes are playing out far beyond Wall Street’s gilded towers: In an old, brick roofing-supply building in Birmingham, Alabama, executives atop boutique M&A firm Founders Advisors are settling into a freshly expanded office space and completing a hasty hiring spree to increase staffing 50%. They’re signing up millionaire owners of companies, eager to start the process of selling at least part of what they built.
“For as long as we’ve been in business, it’s the most vibrant” market yet, Chief Executive officer Duane Donner said. More than half of his clients hail from nearby states and Texas, where the firm has two outposts. “We’ve got more engagements than we’ve ever had.” The No. 1 reason, he said: “taxes.”
In the Midwest, the co-founder of an online marketing company is giving up his dream of stepping into a less active role and letting the business keep growing in coming years under the next generation. Now, selling just makes more financial sense, he said, speaking on the condition his company not be identified. He and his partners are in the midst of setting up their exit.
Founders aren’t the only owners facing pressures. In Manhattan, Boston and other hubs of the private equity world, senior managers are talking with companies in their portfolios about potentially reducing or selling stakes this year to lower tax liabilities and maximize returns, executives and their advisers said in interviews. They’re also looking for opportunities to buy companies that might come up for sale because of tax changes. Company owners would be smart to get out now, one private equity executive noted, because by this fall in the U.S. there will be too many sellers crowding into the market.