PracticeConsultingOMBs sell up in the face of UK recession

OMBs sell up in the face of UK recession

Equity houses see the highest rate of owner-manager company sales in five years.

Entrepreneurs are queuing up to sell their companies despite a drop in prices over the last two months.

The prospect of a slowdown in the economy next year has sparked a surge in the number of owner-managers putting a ‘For Sale’ sign over their businesses, according to private equity houses and several accountancy firms this week.

Peter Hemington, a corporate finance partner at BDO Stoy Hayward, said the rise in the number of entrepreneurs in search of a buyer had increased dramatically in the last four months. ‘We have seen more high quality businesses coming forward in that time than in the last five years,’ he said. ‘They are making a dash for the exit.’

He argued that strong companies were still fetching high prices despite the recent gloom over the economy.

Nick Martin, a director in the private equity division of Mercury Asset Management, said the number of deals and their value had gone down in the last two months. ‘But we are still happy to pay full prices for quality businesses,’ he said.

Hemington said the boom had bypassed manufacturing companies which were still labouring under the effects of the high pound. He said investors were also wary of buying retail businesses given the current fragility of consumer confidence and the spate of spectacular failures in the high street over the last couple of years.

He added that entrepreneurs were ‘much more cycle-driven than plcs, which often have strategies that ignore economic cycles’.

Smith & Williamson said its corporate finance business had seen a steady rise in the number of smaller companies looking to sell-up over the last year, but had not noticed a rush to sell in the last few months.

Private company sales last peaked in 1988, prior to the recession of the early 1990s, with 1,475 deals. In 1997, the number of sales reached 1,120. This year, the figure is set to increase further, though Hemington believes it is unlikely to reach 1988 levels.

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