In the ever-changing landscape of the American economy, Arizona has emerged as a beacon of opportunity for business owners looking to sell their businesses. Despite the challenges posed by rising interest rates and economic uncertainties, the Grand Canyon State offers a unique blend of advantages, making it an ideal destination for those seeking to divest their enterprises. Driven by diverse industries and a stable business environment, Arizona’s current economic climate is a boon for business owners contemplating a sale.
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20-year transformation creates corporate-friendly climate
Arizona’s business landscape has undergone remarkable changes over the past two decades – all of which now lend themselves to a healthy market for the buying and selling of businesses. Gone are the days when the common advice was to come to Arizona for affordable education and then head elsewhere for better opportunities. Today, Arizona’s diverse commerce landscape is creating ample chances for business owners to stick around – and thrive.
Previously characterized by the exodus of talent, Arizona has turned the tide, with many individuals now choosing to stay and build their careers. This shift has been particularly significant in recent years, leading to a richly diverse commerce space brimming with opportunities – especially for entrepreneurs looking to expand into Arizona. U.S. News and World Report even ranks Arizona as the 5th best state in terms of economy, pointing to its robust business environment, growth and employment figures.
One significant factor contributing to Arizona’s appeal for business owners looking to buy or sell a business is its stable and predictable operating environment. The state has actively cultivated a corporate-friendly climate with tax and regulatory policies that encourage growth – in fact, it’s one of the top 10 most tax-friendly states in the country and has the sixth-lowest corporate tax rate nationally. This makes the Arizona economy particularly lucrative, both from a domestic and foreign direct investment perspective.
Thriving industries, in-migration demand & a strong talent pool
One of Arizona’s greatest strengths: its ability to support a diverse range of thriving industries. Whether it’s operation and manufacturing headquarters, semiconductor technology, advanced manufacturing, logistics and distribution, electric vehicle technology or infrastructure development, Arizona provides fertile ground for businesses of all kinds.
In particular, the semiconductor space has gained significant traction, positioning Arizona as a hub for cutting-edge technology. The state’s dedication to advanced manufacturing and infrastructure development has created a thriving ecosystem that is highly conducive to business success as well as domestic and global expansion.
On top of its thriving array of industries, Arizona’s population is growing at an astonishing rate, cementing itself as one of the top 10 fastest-growing states in the U.S. This demographic shift is a critical driver of demand for goods and services, creating an ideal environment for business sales. Companies have multiple avenues to capitalize on this growth, whether by starting new ventures or acquiring existing ones.
Arizona’s evolving universities, including Arizona State University, the University of Arizona and Grand Canyon University, have contributed significantly to the growth of a diverse and skilled labor pool. This burgeoning talent pool is an attractive proposition for businesses looking to establish or expand their presence in the state. The Greater Phoenix market alone boasts a headcount of nearly 100,000 high-tech employees and about 800 software companies, according to the Greater Phoenix Economic Council – validating Arizona’s “Silicon Desert” moniker and attracting new and innovative companies to the region.
Market trends in business sales and acquisitions
Arizona has been on a remarkable trajectory for the past decade, with valuations of businesses steadily increasing. However, the recent rise in interest rates brings with it a natural adjustment in valuations. This shift has led buyers to become more selective, seeking businesses that are well-run, well-managed and boast a strong financial profile.
Despite these adjustments, industry leaders continue to command high valuations, and private equity firms are increasingly investing in Arizona businesses. This influx of investment capital has opened up new avenues for both buyers and sellers in the state.
Buyers in Arizona come from diverse backgrounds, ranging from local entrepreneurs to investors hailing from outside the state. Their motivations differ, but many are drawn to the state’s thriving economy and business-friendly policies. Arizona’s appeal extends beyond its borders, making it a magnet for investment.
Key considerations when preparing to sell businesses
Selling a business is always a complex – and emotionally charged – endeavor requiring careful, strategic planning. Business owners must address critical elements such as legacy preservation, liquidity requirements and tax implications. These factors will help owners determine their top priorities for the sale and keep their ultimate vision for the future at the forefront of the transaction.
Seeking the guidance of tax professionals and financial advisors is essential, ensuring a business owner’s long-term outlook is preserved, external factors are controlled, and state and federal tax requirements are managed.
Additionally, rising interest rates come with an increased cost of financing for buyers – something any business owner looking to sell must keep in mind when crafting their sale parameters. This dynamic has led to creative deal structures, with sellers even providing financing to bridge the gap. Such arrangements often can yield win-win scenarios for both parties, providing sellers with an attractive exit strategy and buyers with the opportunity to acquire businesses with favorable terms.
Future outlook for selling in Arizona’s thriving business landscape
With a diversified economy that is becoming less and less reliant on residential real estate, Arizona exhibits a high level of resilience. This diversification creates a more stable economic environment, reducing the severity of economic fluctuations. Moreover, the state’s focus on operation, manufacturing headquarters and non-retail/service-based industries positions it well for sustained growth.
Arizona stands out as a land of opportunity for business owners looking to sell businesses. Its thriving industries, favorable business climate and constant influx of talent make it an attractive destination. The time for business owners to explore their options begins years in advance, and whether they’re ready to take the plunge into selling their business or simply exploring their options, Arizona’s thriving economy beckons – and the opportunities are boundless.
Authors: Tammi Jackson is a Senior Wealth Planning Strategist for BMO Wealth Management, and Heath Scheid is an Arizona Market Managing Director for BMO Commercial Bank. Dedicated to assisting business owners at every step of their journey, BMO Wealth Management and BMO Commercial Bank are part of a global private bank with a significant Arizona presence that offers the resources and local market understanding needed to advise clients at all levels of wealth. More at uswealth.bmo.com and commercial.bmo.com.
Editor’s note: This information is being used to support the promotion or marketing of the planning strategies discussed herein. This information is not intended to be legal advice or tax advice to any taxpayer and is not intended to be relied upon as such. BMO Bank N.A. and its affiliates do not provide legal advice or tax advice to clients. You should review your particular circumstances with your independent legal and tax advisors.
