1. Taxes will probably go upThe Tories may be leading the National Insurance debate, promising to cancel a future rise. But what about the rest of the tax burden? For some years, the UK enjoyed a very favourable capital gains tax regime. Then taper relief was withdrawn, triggering a rash of sales in early 2008. The future is unpredictable. Will CGT rise? Will taper relief be reintroduced by the Conservatives? At what level? If re-elected, will a Labour government bear down on entrepreneurs? There is so much uncertainty around the likely future tax regime that many entrepreneurs will regard now as the best time to sell.
2. Private equity back in the gameFunds raised by private equity houses in 2005/06/07 need investing. The impetus of such “uninvested capital” means that private equity is very much back in business. Recent UK mid-market deals involving entrepreneurial and owner-managed businesses – including MBOs (Minivator), secondaries (Xafinity) and take-privates (FDM Group) – show that private equity is returning as an option for management teams and entrepreneurs.
3. Debt looseningMarket observers talk of some loosening of credit, but the figures show that bank lending is still behind targets. Certainly, debt-providers are looking for quite different levels of earnings reassurance than in the heady days of 2007. That said, the banks with the stronger balance sheets (cf, HSBC) are becoming more prominent in backing mid-sized deals.
4. Price is rightMany M&A observers lament that price expectations remain at 2007 levels. Such owner-managers are likely to be disappointed. However, quality businesses with quality earnings will always be attractive. With their nose for a deal, Britain’s leading entrepreneurs may just feel that market conditions are too fragile to hang on for long.
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