An overwhelming 94 per cent of private equity and venture capital houses are confident about the long-term future of the M&A market and the wider economy in general, meaning 2017 could be the perfect time for selling a business, according to research by KBS Corporate.
The study, which comes shortly after the outcome of the EU membership referendum was revealed, shows that 97 per cent of the survey respondents would continue to deploy their funds at the same rate for the rest of this year and going into 2017.
Simon Daniels, director at KBS Corporate, says, ‘Our research found that respondents were of the opinion that a fundamentally profitable business is an attractive acquisition no matter the circumstances, indicating that 2017 may well be in line with record levels experienced in 2015.’
Daniels suggests that acquisitions of UK-centric businesses, whose operations are unaffected by the European Union, are also likely to continue at the current pace going into 2017.
Are there any specific industry sectors to look out for?
According to the report, business owners in certain sectors can expect a flurry of M&A activity in 2017.
Three that stand out in particular are financial services, manufacturing and Information & Communications Technology (ICT), according to the report.
Daniels says that following an initial shock as a result of the EU referendum, activity levels within the financial services sectors are recovering.
An uptick in inbound investor appetite is set to be driven by a weaker sterling and further interest in the UK buoyed by solid growth prospects.
Daniels continues, ‘The report shows that the construction industry has experienced an increase of almost 25 per cent in the total number of deals compared to 2015, with the past few months seeing a number of the sector’s bigger players reporting robust performance results accompanied by a generally positive outlook for the foreseeable future.’
Why will the new year be such a good time for selling a business in 2017?
Investors are set to become more active in 2017, which means that anybody hoping to sell a business will have a larger pool of potential suitors to negotiate with.
With more competition, it stands to reason that business owners looking at selling a business are more likely to get the price they are looking for, according to Daniels.
‘Previously, individuals are required to be employed within the firm and hold a stake of 5 per cent or greater in order to claim a £10 million lifetime allowance at the reduced rate. However, under the new changes which are being referred to as ‘investors’ relief’, the provision has been extended to all long-term investors with shares in privately-owned companies.
Daniels concludes, ‘This could potentially pave the way for a new type of mainstream investment, with investors now provided with a greater incentive to invest in SMEs and subsequently benefit from the rewards of a reduced tax liability.’