Over the past few weeks a peculiar trend has emerged amongst a selection of the UK’s most well known entrepreneurs – they have either sold their businesses or re-purchased businesses they had previously sold.
For starters Gu, the popular purveyors of decadent desserts, was sold off by its owner, former military man James Averdieck. Then the successful window company Synsealto was sold off to a private equity firm. Added to the list was insurance-guru Peter Woods buying back the well known eSure brand from Lloyds Banking Group. Cut-price clothing company Matalan was completely refinanced by its founder John Hargreaves and the owner of Net-A-Porter, Natalie Massenet relinquished her majority stake for a tidy sum of £50m. Factor in the rumoured to be imminent £350m sale of Card Factory and that’s quite the flurry of activity so soon into a year.
The question that begs to be asked is what exactly has brought on this sudden surge of selling and buying? If anything the economy is finally starting to show signs of healing after the devastating wounds it suffered due to the global monetary meltdown. So what is it? Let us attempt to speculate.
Taxes could be an issue here- National Insurance has been a big talking point in the world of politics, with the Tories pledging to halt plans for a forthcoming rise. However what of capital gains tax and other potential burdens? Previously here in the UK capital gains was taxed at an attractive rate, but following the 2008 withdrawal of taper relief business owners raced to sell their businesses, similar to the rush seen recently. With a general election on the horizon uncertainty is in the air. If the Tories come into power will taper relief see a return? Will capital gains tax rise? The answers are not yet clear and this confusion over the impending new tax regime could be convincing entrepreneurs that now is a good time to sell.
Another strong point could be the re-emergence of private equity money. Private equity houses across the land will have much un-invested capital from 2005-07. Deals across the mid-market with entrepreneurs and self-managed businesses like Xafinity, FDM Group and Minivator have proved that managements and entrepreneurs are seeing private equity funds as an option once more.
A relaxed attitude from debt-providers is also being attributed to the increased activity. This may not ring true across the whole board as generally bank lending has not yet caught up with its targets. However the power players, such as HSBC, are becoming more of a force in the backing of mid-sized deals.
Finally, a main point may simply be that the businesses are doing very well, so why not cash in when the price is right? With economic standing in a fragile place right now Britain’s shrewdest entrepreneurs are just doing what they do best, making savvy business decisions that see them a nice profit.