Why is NOW the right time to sell?

The start of 2019 has been very active within the M&A marketplace, with a total of 406 transactions involving UK companies in the first two months, according to Zephyr. The rest of 2019 looks set to be going the same way, with several strong buyers announcing they are looking to acquire new businesses and invest in new opportunities.

 

With lots of uncertainty surrounding Brexit, now is a great time to sell as many companies are looking to acquire before the deal is done. It’s still uncertain how Brexit will affect the M&A market, but things are looking up, two years on from the Referendum and the market is still growing. One of the biggest European deals to take place in 2018 involved a UK company: Shire plc, a Jersey based company focusing on biopharmaceutical and rare diseases. Shire plc was acquired by Takeda Pharmaceuticals, Asia’s largest pharmaceutical company, for £46 billion. Since the acquisition was announced in April 2018 several deals have been announced and completed within the pharmaceutical sector, with many involving UK companies.

 

Cross-border deals are expected to rise in 2019. According to Mergermarket’s H1 2018 Global Report, global M&A reached its highest post-crisis value in 2018. With the current weakness of the pound sterling, UK businesses have become more attractive to overseas buyers. There is a higher demand for overseas buyers who see the current UK M&A market as good value given the fluctuations of the value in their own currency. Looking forward, the weakening pound sterling, tied with the relatively stable UK economy is creating strong conditions for sustained overseas investment into the UK M&A market.

 

Selling your business can be due to a variety of circumstances, including retirement, a change in personal circumstances or realising a new path. Whatever your reasoning, the timing of the sale can really influence the value. A Private Equity deal allows you to ‘cash in’ on some of the value tied to your company whilst also maintain control of the business. You can also benefit from a secondary exit in the future when your business has gained further growth. It is always best to sell when you don’t need to, as this allows you to obtain the maximum value for your company.

 

Capital gains tax is another point to take into consideration when thinking about selling your business.  Currently, if you sell your business you pay 20% in capital gains, but this can be reduced to 10% with Entrepreneur’s Relief. It is strongly believed that the capital gains tax will increase, potentially rising to 40%. Therefore, it is advised you take advantage of this before changes take place.

 

Several sectors in the UK are seeing high levels of activity due to these favourable market conditions, including the IT sector, which saw a total of £2.2 million deal value in the first two months of 2019. There are many trends expected to continue this year and if you are thinking of selling your business now or at some point in the future, it’s important to take advantage of the strong market.

 

With the 2019 market looking promising, now is a great time to obtain a company value. To find out what your business is worth in this buoyant market, you can value it by using our free Business Value Calculator or speaking to one of experts on 0203 441 2003.