Two-thirds of small and mid-sized enterprise owners in Britain are thinking of selling their company. But they should look before they leap – with UK entrepreneurs also less informed about their exit strategy than any other country in Europe.
After a sustained period of decline, merger and acquisition sentiment has finally turned a corner in 2024. Amid talk of a rising number of deals, and growth in deal value, many entrepreneurs are now flirting with the idea of cashing in on SMEs they have built up in recent years.
According to new research from international M&A advisory firm Marktlink, over the last 12 months 61% of UK SME owners have thought about exiting their company. That sentiment is higher in the UK than in any European counterpart.
The survey of 1,066 business owners across the UK, Netherlands, Belgium, Germany, and the Nordics – including 224 respondents from UK SMEs – set out to uncover entrepreneurs’ varying levels of readiness and attitudes towards the sale of their business. Elsewhere in the continent, Marktlink found that as few as 38% of owners were mooting a sale in the Netherlands, while Germany and Belgium did not clear 50%. But selling up shop is easier said than done, and SME owners are advised not to act rashly when starting the deal-making process.
Source: Marktlink
Speaking on the threats, Joe Moran, managing partner of Marktlink’s Midlands operations, said, “Selling a business isn’t just as simple as deciding that now is the right time – it requires careful planning and consideration which begins years in advance of the sale process. It takes time to build a healthy financial track record, transition key responsibilities from the owner to other managers, and ensure continuity in operations – all of which are key to maximising the value of a business. This level of preparation can also enhance tax planning, assist with legal compliance, and provide entrepreneurs with more leverage during negotiations.”
And despite their gung-ho attitude to selling, UK owners are among the least prepared to face the process. Marktlink found that only 42% of SME owners had a clear exit strategy – the lowest of any country except Germany, which also sat at 42%. But making things worse for British SMEs, 50% admitted they had no clear understanding of the consequences of selling, either – while that was only 47% in Germany.
Highlighting the issues owners need to consider, Jonny Parkinson, managing partner of the firm’s North West operations, added, “Unforeseen circumstances, such as a sudden illness or family event, can sometimes force entrepreneurs to sell their business before they anticipated. Without preparing for exit, they may be faced with reduced pool of buyers that leverage the urgency of the sale to negotiate a lower purchase price or more favourable terms for themselves. However, thorough exit preparation enables entrepreneurs to make smarter decisions, maximise the company’s value, and ensure they are equipped to respond quickly to economic and political changes.”
Source: Marktlink
He also noted that firms were more likely to realise their full value in a sales scenario, if they tapped external expertise. Parkinson concluded to that end that “working with an experienced M&A advisor can help SME owners to establish the necessary steps to achieve their future ambitions and navigate potential sale challenges”. In particular, this will be important amid the “highly anticipated increase to capital gains tax (CGT) in the Autumn Budget, receiving this guidance is only becoming increasingly important in a rapidly evolving M&A market.”
Founded in 1996, Marktlink is an independent M&A consultancy. The firm’s international team consists of 300 M&A specialists who support companies in transactions between £5 million and £100 million.