With activity on the increase since 2011, the UK M&A landscape is proving to be quite resilient. Over 7,000 acquisitions were completed last year, making 2016 the busiest year since 2007 in terms of transaction volume. At KBS Corporate, buyer appetite for UK mid-market firms is only getting stronger, and as a result, we expect the remainder of 2017 to deliver great things.
In light of these favourable market conditions, many company owners are taking the initial steps towards a company sale, through careful planning of their exit strategies and desired timescales.
Over the years, we have come to learn that each business is unique, as are the reasons why a company owner may decide to exit. In this article, we have rounded up a few of the most common reasons for sale, and look at how careful planning can help to provide a profitable outcome.
In the event of retirement, it is essential that a company owner plans their exit strategy well in advance of a sale. This will provide plenty of time for the company owner to develop the business, allow them to understand what they want from the sale, and gain maximum value for their shares.
Failure to do this may leave many business owners with no option but to remain within the business for a period of time, further delaying their well-deserved retirement plans, or sell the company quickly for a value much lower than expected.
Along the same vein of retirement, lies illness. Due to poor health, a business owner may have to relinquish their business, simply because they are no longer physically or mentally able to handle the running of the company. Having an exit strategy in place can ensure maximum value is achieved even if a ‘quick fire’ sale is needed.
There are many contributing factors to a business performing exceptionally well, ranging from a clear understanding of the market and customers and adequate financing, to an under reliance on a single customer and having a strong management team in place. One of the strongest contributors in maintaining high performance is the ability to step back and identify the need to change.
In order to keep pace with the market and continue to drive profits, often the answer lies in passing the company into the hands of a new owner who can bring new direction to the business. In this instance, it is paramount for business owners to spend time creating a strategy that will offer the best terms for all involved, including the company owner, the buyer, the employees and the company itself.
UK based trade acquirers have shown signs of increasing activity as they release cash reserves maintained since the 2008 economic recession. These reserves are now being invested to facilitate growth initiatives, with many companies opting for growth via acquisition rather than through organic and traditional measures. With access to finance remaining at an all-time high, there are more active buyers in the market, which, in turn, entices more companies to market, as there is simply more demand for successful businesses.
Currently, business owners can claim Entrepreneur’s Relief when selling all or part of their business, with owners paying just 10% Capital Gains Tax as opposed to the normal rate of 18% or 28%. This represents a huge saving when owners look to maximise their return on effort, and many UK business owners have seized the opportunity. There is no limit on how many times a business owner can claim Entrepenuer’s Relief, allowing them to claim up to £10m of relief during their lifetime.
Changes in the industry
Changes in the industry can be brought on by economic conditions and industry specific trends, which can have a positive impact on the M&A market. If the industry is in a sustained period of growth then corporate acquisition activity will be high, as acquirer companies are either seeking to enter the market or consolidate and strengthen their existing market position.
In order to benefit from this economic success, company owners should begin planning for sale and acknowledging their requirements in order to maximise return and give their company its best possible chance in the M&A market.
Whatever your reason for sale, we are confident that we can help you to achieve your goals and deliver an outcome that exceeds your expectations. Please contact KBS Corporate today to speak to us confidentially or to arrange a consultation.