A consistent question from clients planning a business exit (whether via a Trade Sale or Management Buy Out (“MBO”)) over recent years has been “is it a good time to sell?”
Generally, the Mergers and Acquisitions (“M&A”) and funding markets flourish when there is confidence and stability, and political uncertainty doesn’t help with either of those!
Interestingly, in the years post referendum, when there was significant political uncertainty, UK deal flow has been surprisingly resilient. This has been shown across numerous deal tracking databases and is consistent with our own experience in the local market, but what impact could the election result have?
The 2019 general election
The recent general election resulted in a considerable change in the political landscape, following several years of political stalemate. Whatever your political persuasion, it is clear for the first time in several years, that there is now a party in power with a clear majority and authority to pursue its chosen strategy.
So, what does that mean for business owners looking to sell their businesses?
The key message of the Conservatives’ election campaign has been their pledge to deliver Brexit; the UK’s exit from the European Union is now almost inevitable. This should give businesses short term certainty. Longer term there remains a degree of Brexit uncertainty as the EU and the UK will need to reach a further deal, but most commentators expect both parties will want to be pragmatic and avoid a “no deal” outcome. This relative increased stability should improve the confidence levels of funders and acquisitive companies.
The manifesto suggests that the new Government is not planning a radical overhaul of taxation. The policies are focussed on the UK continuing to be business friendly from a tax perspective, with relatively low corporate tax rates and attractive research and development tax incentives.
Entrepreneurs' relief
Entrepreneurs’ relief may be reformed, but most observers now seem to expect a tightening of the rules rather than a radical overhaul. However, the 10% tax rate is a particularly low rate and we have noted numerous discussions around the overall benefit created by this relief. Any changes may have a significant impact on owners looking to exit, and advice will need to be taken.
The manifesto of the new government places great store on looking globally for trading relationships. There is an emphasis on signing trade deals and attracting investment from emerging markets and Commonwealth countries as well the US. If the strategy is successful, then for owners considering a trade sale, we may see additional deal flow from these markets over time.
Conclusion
The UK now has a much more stable political environment and a government manifesto that is focussed on the UK being an attractive place to trade and invest. This should remove some uncertainty and increase business confidence. The UK should continue to be an attractive place to acquire for overseas acquirers and we would expect the funding market for facilitating MBOs to also continue to be positive. Overall, there are therefore good reasons to be optimistic for UK deal activity during 2020.
Roadmap to a successful business exit - Breakfast seminar
If you are a business owner looking to exit your business in 2020, or would like to learn more about;
- Selling your business to a trade buyer
- How to exit your business via a management buyout
- Protecting your position on sale and maximising net proceeds
then why not register now for our free breakfast seminar on 12.02.20. Book now to register your place.
Leading a business through change is a challenge and finding the best route to the future you want requires true expertise. Whether you’re buying, selling or raising finance for a business, our award-winning Corporate Finance team are with you all the way, bringing strategy, insight and conviction to get you the results you really want. If you are considering a transaction, or would like more details on your future plans, then why not drop us a line today to see how we can help make your ambitions a reality.
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Tags: Corporate Finance, Business Taxes
