One third of privately held businesses in the UK expect to see a change of ownership within a decade, according to Grant Thornton’s International Business Report (IBR).
The proportion of UK businesses expecting change has remained static since 2003, however, the uncertainty surrounding Gordon Brown’s anticipated crackdown on capital gains tax relief could see a dramatic increase in the number of privately held firms selling up. The survey of 7,200 business owners across 32 countries uncovered a global average of 28% of firms expecting a change of ownership.
“Countries with low interest rates, thriving businesses with high profit levels and banks that are willing to lend provide the ideal backdrop for a thriving entrepreneurial culture. In these environments you would expect to see high levels of transactional activity, which may well explain the comparatively high number of western businesses expecting a change in ownership within the next 10 years,” said Alysoun Stewart, head of Grant Thornton's Strategic Services Group.
Of the UK businesses expecting a change of ownership, 53% anticipate it happening in three to five years, 18% within two years and 29% in six to 10 years. This contrasts slightly with the average expectation in the EU where more than one quarter (27%) anticipate change within two years.
"Although the majority of UK businesses have a slightly longer time frame in mind when it comes to selling up, it is still crucial for them to have their exit plan in place. Exiting from a business is one of the most important decisions a business owner makes both for the company and their own personal financial position. Careful and timely planning is essential to ensure the successful continuation of what has been built, to maximise the value of the business at exit and to protect the amount of wealth that ends up in the owner's hands,” said Stewart.
A trade sale remains the most popular sale option for UK businesses, with 51% of respondents believing this is the route they will follow, up from 40% in 2003. Sweden is the only country with a higher proportion of businesses expecting to see a consolidation of competition – 57%. Both the UK and Swedish figures are considerably higher than the EU average – 36% – and global average of 25%.
A management buy out/buy in is the second most likely sale type expected in the UK at 16%, up from 10% in 2003, followed by investment by private equity –13% – up from 6% in 2003. Only 8% predict a flotation/IPO within the next 10 years.
“Although the anticipation of investment by private equity firms in the UK is lower than the global average, it has increased from four years ago. In contrast, a much higher proportion of businesses in China, India and Botswana expect investment from private equity in the near future reflecting the increasing desire on the part of these firms to play their part in fuelling and benefiting from the rapid growth in these economies,” said Stewart.