Privately Owned Business newsletter - June 2022

What's next if you want to exit your business?

When selling your business, make sure to fulfil your own hopes and expectations

This newsletter deals with one of the biggest issues a business owner will ever encounter – What’s next should you wish to exit your business?   For most business owners the relationship they have with the business, the team who run it, and customers and suppliers, will be a very deep one and there are few owners who, when they think of exiting/divesting, will only be thinking of maximising their disposal proceeds.  Rather they will almost always be thinking as well about the long-term stewardship approach of any buyer, the impact that sale will have on the business they have created, and its likely future trajectory for everyone involved in it.   No business owner who has invested their creativity in their business wants to see it fail post sale even though this is exactly what happens in many cases if the business is starved of investment or heavily indebted as a result of the transaction.

We look therefore in this newsletter at a range of potential deal frameworks which a business owner thinking about exiting will want to consider: Management Buyout and employee ownership where the existing team may well have the greatest influence over the future of the business; trade sale where a wide range of potential purchasers may have very different views of the future of the business; and transition to the next generation of a family company.  

Even if maximising the sales value is not necessarily your sole deal criteria, everyone will want to reasonably minimise their tax on the transaction.  These transactions are often once in a lifetime and few things are likely to spoil it for you as much as finding out afterwards that you paid perhaps substantially more tax than another owner in a similar set of circumstances because the options available to you were not fully considered.  We therefore have three articles on different aspects of tax: ensuring that you are aware of any tax vulnerabilities and fixing them before you sell; navigating your way through the wide range of tax rates that can apply on a sale; and making sure you think about the Inheritance Tax implications of moving from business wealth, which is usually 100% protected from the tax to disposal proceeds which usually have a 40% exposure to it.

If you have spent your career building your business then whatever your reason for exiting you need to identify the right combination of deal and tax so that you both protect the future of the business as fully as you want to, and equally protect the financial future of your family. We hope that this newsletter will give you some insights into what is likely to be the right approach for you if you are thinking about business disposals and if you are thinking about it, we would love to talk to you about your hopes for the transaction and to help you achieve them.

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