EXIT PLAN N I NG
Februar y 2021
WHY 2021 MAY SEE
AN INCREASE
IN ASSET SALES BY IFA BUSINESSES Merger and acquisition activity has been in short supply of late, but the current stasis cannot continue indefinitely. Giles Dunning, M&A financial services specialist and Partner with Stephens Scown LLP, predicts that asset sales may grow in number, as an alternative to the more traditional share sale.
T
he New Year is upon us and, for many IFAs, it couldn’t come soon enough. With Covid vaccinations now taking place across the country, there is renewed hope that business plans to sell can at long last be implemented.
why these were the preferred route. The key reason is that the business is sold in its entirety and the buyer takes on existing liabilities. A share sale is usually more tax efficient for the seller who may be able to claim Business Asset Disposal Relief.
IFAs who wanted to sell their business during 2020 may well have found they were stymied by the effects of the pandemic. Now, they can begin to look forward again. However, we now exist in a different environment – and so, it may not be M&A business as usual.
In contrast, asset sales have generally been less favourable for sellers, particularly because they can lead to the seller facing two tax bills – one for corporation tax and the other for personal tax (although the burden may be lessened if expert guidance is taken at an early stage). Clearly, each sale is individual and specialist advice in this area is essential. Some mitigation may be possible using effective tax planning.
SHARE SALES NO LONGER THE ORDER OF THE DAY?
There are several factors contributing to why asset sales may become more commonplace in the months ahead.
If we look at pre-pandemic recent years, we can see most deals were share sales. For sellers, there are several reasons
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• Speed IFAs who wanted to sell last year but were unable to, could feel that time is of the essence. They may be ready to retire
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