Selling A Merchant Portfolio: Is There A “Best” Time Of The Year To Sell?
What is the best time of year to sell a merchant portfolio?
This is one of those questions that typically produces a different answer from everyone you ask. To muddy the waters even more, the question can also be re-framed into “what is the worst time of year to sell a merchant portfolio?”.
Wearing my ever present M&A hat, let me offer a few thoughts:
1) As a general proposition, it’s never a bad idea to sell your merchant portfolio towards the beginning of the year. This typically gives seller maximum time to re-invest the sale proceeds before having to pay the tax liability for the sale.
2) If tax considerations are not a tier 1 driver for the portfolio sale, there really isn’t an optimal time to sell as the marketplace of merchant portfolio buyers is ALWAYS liquid.
3) If you have a merchant portfolio which exhibits seasonality (3-4 month periods where sales volume is consistently up or down due to the nature of the merchant accounts in the portfolio), understand that an experienced buyer will pick that up in their due diligence. Point being, don’t delude yourself into thinking that selling during your “busy” season will command a higher valuation as the buyer is going to average the net processing revenue over a longer time frame (6-8 months) in any merchant portfolio where seasonality is evident.
4) The ‘end of year sale”. Selling your merchant portfolio in November or December requires some thought. It’s important to understand the driver for the sale. In most instances when sellers are going to market end of year, it involves tax implications. This in of itself is certainly understandable and as I said earlier, the merchant portfolio marketplace is ALWAYS liquid. The key thing for a seller to remember in this scenario is to try and avoid a situation where you HAVE to sell by end of year, and make sure you present the situation as one where you would PREFER to sell my end of year. If a buyer knows you’re under the gun to move the merchant portfolio by year’s end, they may try to squeeze you a bit on valuation.
Just a few thoughts from little old me. There are plenty of other scenarios I didn’t comment on so by all means, shoot me an email with your specific case and I shall gladly respond.