2021: Is Now a Good Time to Sell Your Business?

April 29, 2021

Following a few years of Brexit-related uncertainty, 2020 was expected to be a bumper year for M&A. The impact of COVID-19, however, sadly disrupted this, with the market effectively coming to a standstill at the peak of the lockdown restrictions.

 

With a rush at the start of the year to get deals done in anticipation of potential changes to capital gains tax and a significant amount of cash available amongst both trade and financial buyers, and lenders, the UK M&A market has rebounded from the slowdown in deal activity. Furthermore, although the risk of changes to capital gains tax has since disappeared (…for now), what the future looks like remains ambiguous, prompting many business owners to contemplate an exit.

 

Here at Bluebox, we recently conducted a poll asking business owners if they thought it was a good time to sell in the current climate. The results were split equally between “it’s a perfect time” and “we’d hold off for now”. Whilst we have certainly seen an increase in appetite amongst buyers since the summer months of 2020, the ‘right’ answer depends on the respective business in question; ultimately, what more can be achieved in the next few years to add ‘capital value’, compared to today?

 

There are also other factors to consider, three of which are listed below.

 

  1. Business performance

If you are thinking about embarking on a sale exercise, it is almost inevitable any buyer will want to understand the underlying strength of the business before, during, and after, COVID-19. Each business will have its own story to tell and how this is positioned will be critical to the exercise e.g., If the business benefitted during the period of COVID-19, how sustainable is this moving forward? On the other hand, if the business in question suffered during COVID-19, how will it recover and how long is it expected to take?

Clearly, businesses that have been resilient throughout COVID-19 will command a premium on the market, however, being able to credibly demonstrate how the business will perform in the future will be of fundamental importance.

 

  1. Exit roadmap

Two of the biggest changes we have seen in the M&A market are that deals are taking longer, and many buyers are placing more emphasis on consideration contingent on future performance (i.e., post-COVID). For any business owner, it will therefore be important to consider your own objectives, specifically, when you are looking to conclude a deal, and how willing you are to ‘roll the dice’ on upcoming trading.

 

  1. Preparation

Against the existing backdrop of economic uncertainty, embarking on a sale exercise adequately prepared will give you the best chance of succeeding. In any process (COVID-aside), maintaining momentum is critical as you never want to give the other side an opportunity to second guess themselves. With that in mind, and so much else going on in the world, getting your affairs in order will help to ensure the process runs as smoothly as possible while giving off a sense of professionalism about your business.

 

While the UK M&A market may have evolved because of what has taken place over the last year, investors and acquirers have not disappeared, and now is as good a time as any to explore the market. Consequently, if you are thinking about either fundraising or selling your business, we would be delighted to arrange an informal meeting (over Zoom or Teams) to discuss your options in more detail.

 

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