Now the details of the government’s budget changes have sunk in, and many challenges now realised, businesses who are considering their buy or sale strategies can now plan ahead with some degree of certainty.
Despite the immediate increase in Capital Gains Tax (CGT), changes introduced to Business Asset Disposal Relief (BADR) and reforms to inheritance tax relief, it appears that the M&A market has not slowed. Although rises haven’t been as bad as people may have expected and CGT rises haven’t had an adverse effect on M&A transactions, there is a clear appetite for business owners and shareholders to complete sales before the 2024/25 tax year ends, mainly to avoid any increases in BADR rates.
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IDEX Consulting sought advice from tax, legal and buy-and-sell experts to understand what lies ahead, transaction predictions for 2025 and how businesses can best prepare for this year’s market conditions. Below are some highlights from the advice shared in our ‘UK budget: Implications for the M&A market’ webinar’.
Sale exit timeline - If you’re planning a sale in the next 3-5 years, it’s incredibly important to start planning your exit options now.
Market activity - The flow of M&A deals are expected to continue, with a clear incentive for sellers to speed the process up in the short-term
Deal times - Deal processes are taking longer as buyers are increasing their due diligence. This is affecting pricing and the viability of deals, so sellers need to take extra care in ensuring their business financials and house is in order.
Avoiding unnecessary tax charges - Selling your company shares first may help business owners to avoid a double tax charge.
Business Asset Disposal Relief– BADR will rise in rate from the current 10% of gains over £1m to 14% from 6 April 2025 and 18% from 6 April 2026. If you’re considering exiting your business, now is the best time to seek advice and start planning your options.
Change of Control – The FCA takes approximately three months to do a change of control, and they can also put a pause on the process.
Regulatory changes and compliance – Future regulatory and compliance changes likely, especially regarding stricter measures for data privacy as cyber-attacks become more sophisticated. ESG disclosures are also becoming mandatory, drive by regulatory and consumer demands.
Optimising your earn out - For the last part of an earn-out you need to think about what the tax rate will be in 3-4 years’ time.
For more strategic advice on how to mitigate risk, stay ahead and optimise your business worth for a successful sale, access our webinar replay below.
If you’re considering a sale or planning your exit strategy, or perhaps you’d just like some free intel on the M&A market don’t hesitate to get in touch with one of our M&A specialists who will be happy to advise.
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