In the final part of this three part series, financial journalist James Ashton talks with Adrian Howells, a director in our corporate finance team about the UK economic recovery and the wider range of sellers in the current market.
The video and a transcript of the interview can be viewed below.
The deals market: who's selling?
James Ashton: So Adrian, we're seeing rising confidence in UK economic recovery. I'm just wondering in this market who'd be a seller?
Adrian Howells: I think because of that economic recovery that we're starting to see a wider range of sellers. Prior to the positive news that we're starting to see in terms of the wider economy, lots of sellers were coming to the market as owner managers who have had a bit of a mixed 12 months and some have flourished and want to get back to work and carry on with their business, some have spent that time with their family and decided, or had a bit of a worry or a shock during the last 12 months and have decided, actually what I don't want to do is spend the rest of my life running this business and who are looking to sell. So, we've got sellers who are doing so for very personal reasons, but as confidence returns to the market we are starting to see a wider range of sellers coming forward to look to exit their businesses.
James Ashton: Well that's interesting, so actually lifestyle decisions are really playing into some of the deals that you're observing at the moment?
Adrian Howells: That's absolutely right, what we try to do is get right into that conversation with them. We understand that this is a very human decision and we try to walk them through what their options might be. In any growing business it's always the case that if you wait you will achieve more, but ultimately you will end up waiting forever on that line of logic, and that is why that human factor comes in and become so important because it might be that a seller has had to delay because of either Brexit or the pandemic, or as I say they simply that have had a bit of a shock or some sort of a wakeup call that makes them think that there are more important things in life.
James Ashton: So, Adrian what's your view on CGT? Clearly you were very busy pre-budget - a lot of deals that Quantuma did. There was an expectation there would be some changes - we haven't seen that. It feels like it's been a bit of a red herring so far but in the fullness of time you do think that there will be tax changes and that plays into the mind of founders of firms?
Adrian Howells: I think CGT is really driving behaviour. We were, as you say, extremely busy right ahead of the spring budget this year because of fears of CGT. The expectation really was that we would see CGT being aligned with income tax. It didn't happen, that was a surprise. There wasn't a breath mentioned about it. Nevertheless, we still expect it to happen for a few reasons - Clearly there's a pandemic to pay for. Even though frankly raising CGT won't raise a huge amount of money but it's politically popular. This is a 'tax the rich' sort of thing. But also, perhaps importantly and as a curveball, Joe Biden said he's going to do it - and of course, if America does it, that whole argument of oh, the rich are too mobile, and they will simply move elsewhere falls away.
James Ashton: And what about this trend for founders of firms and entrepreneurs to hand over their companies to their employees - I think you've been involved and in some of those transactions, do you see more?
Adrian Howells: Although they've been around for a while, actually Employee Ownership Trusts as they are called are on the rise. They are politically popular as it is about a democratic ownership and so it is in term of levelling up of the economy they help. From a seller's perspective they are quite an easy transaction to manage. The seller remains in the driving seat much more so than in a traditional transaction, and we can't ignore the fact that you can sell your business tax free. So, versus the potential change in Capital Gains Tax to maybe 45 %, a tax-free sale is very appealing indeed.
James Ashton: So, you have warm feeling in your heart and also a warm feeling in your wallet as you step away from the company?
Adrian Howells: That's exactly right.
James Ashton: Adrian, thank you very much.
Adrian Howells: Thank you.
Originally published 06 July 2021
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