Is the immediate post-Brexit period a good time to sell your business?
Perhaps one of the most enduring images of the UK’s vote to leave the European Union will be the chaos and confusion that followed. The prime minister stood down, the markets tanked and voters on both sides of the argument came to realise that nothing was quite as clear cut as had been promised.
This has affected the corporate arena as much as any other, and raised the question of whether this is a fantastic time to sell a business, as some suggest, or in fact the worst possible time, as others fear.
The value of the pound
Within hours of the result’s confirmation, the sterling began tumbling in value, hitting lows not seen in over three decades.
In addition to making the price of UK products fall for overseas buyers, boosting the prospects of organisations trading internationally, it also made UK businesses cheaper to acquire for foreign investors.
Perhaps this is what encouraged some business owners to feel that the post-Brexit madness would be a great time to sell. However, the value of the pound did begin to recover in the following days, meaning the effects were much less severe overall.
Although there is still much uncertainty surrounding when - and even if - the UK will confirm its exit from the EU, the sterling is unlikely to reach those lows again, certainly not for a sustained period of time.
Mergers and acquisition activity slowed dramatically in the months leading up to the referendum as investors shied away from making commitments in uncertain times. Unfortunately, the eventual result has done little to shed much light on what lies ahead. However, individuals as well as funds are unlikely to sit on their cash forever, and crises such as these are often seen as a prime time for buyers, which can even lead to overreaction and a flurry of M&A activity. In short, there are still buyers out there. Though they may be cautious, they still have the desire to invest.
Deciding to sell
Taking the value of the pound as an example, it’s clear that situations can change rapidly. When values go up and down so quickly, it shows that such short-term factors don’t make for good reasons to sell your business.
The selling process is long and complex. It requires finding, marketing to and vetting interested buyers, due diligence, continuity plans, negotiations, agreeing legal aspects and plenty more beside. Undertaken with adequate care, this can take months.
A short period of buyer activity, or the day-to-day fluctuations of the pound, don’t provide a solid basis on which to rush a sale. In fact you should never sell hastily, as it’s one of the biggest and most consequential decisions a business owner will make.
That said, if you were already considering a sale, or you’re part way through the process, there is no cause for panic. Values rise and fall constantly, it’s the nature of markets. But so long as you have specific goals for your sale, including knowing your best price and how to walk away with the money in a tax-efficient manner, then you should still be able see your current plans through to fruition.
To learn more about selling a business, talk to a BTG Advisory and we’ll guide you through the process and to achieve the exit you need.
Martin has nearly 20 years’ corporate finance experience specialising in advising owner managed businesses. Martin has considerable experience advising on business sales as well as management buy-outs and acquisitions across a wide range of sectors and deal sizes.