The Autumn Statement brought a much-needed air of economic and fiscal positivity. There was plenty for business owners and consumers to like in the quest for the elusive economic growth we’ve missed over so many years. Falling inflation and a (slightly) positive economic outlook for the next few years created the headroom for Jeremy Hunt to open the coffers (gently) in advance of an election.
The making permanent of the full expensing capital allowance should go some way to promoting investment and represents a serious approach to supporting growth. Equally, the cutting of National Insurance for all workers and the simplification of NI for the self-employed are welcome attempts to boost consumer confidence.
From a Midlands perspective, the creation of investment zones in both the West and East Midlands is a positive step – one might question why this hadn’t happened before!
So against the positive backdrop, it is worth reflecting on how what has been announced will impact the strategic M&A decisions of business owners. The major cloud on the horizon is the prospect of changes to Capital Gains Tax by a future government. The reality is that there are few votes in capital taxes and the prospect of equalising income and capital may well raise its head early in a Labour administration. We have written in the past about the gross iniquity of this – a tax on entrepreneurs and wealth creators is fundamentally wrong and should be avoided at all costs but that doesn’t mean it is not a real possibility.
For business owners who have dealt with Brexit, Covid and the myriad of other economic challenges over recent years, there should be a very real consideration of what next year might bring. An increase in capital taxes has to be a real risk and should be part of any exit/strategic planning.
Written by Robert Johnson, Partner
For many managers, acquisition is a route to future business growth. Although an acquisition should help achieve growth, the question you should also ask yourself is “Will the acquisition add long-term value to my business?”. In this blog, I’ll look at some of the key areas to create value beyond an acquisition.
Strategic alignment
Any acquisition must stay true to your overarching business strategy. It needs to be part of a clear 3-5 year strategic vision of where you want to take the business. As the deal process progresses and you gather information, owners and advisors should step back and assess whether the deal is the right one and if it will indeed create value long term.
Managers and founders might see this as an output from the due diligence phase of a deal – whilst that’s true in part, at every stage you should be questioning whether the deal fits with the overall business and acquisition strategy. If it doesn’t, you shouldn’t be afraid to walk away from a deal if it isn’t right and won’t create the long-term value you are looking for.
When we build a pipeline of acquisition opportunities for clients, we constantly review the criteria to determine if the overarching strategy fits with the targets we are considering.
Due diligence
Thorough due diligence also lies at the heart of value creation. Due diligence should go beyond the financial aspects of a business and include all key value drivers. The information found during due diligence can then be considered in relation to future value creation.
Historically, acquirers would have a 100-day plan for the initial period following the acquisition. However, this has evolved and become a much more dynamic process often involving key actions in advance of the closing of a deal. Our advice to buyers early in the transaction process is to think about creating a day zero (deal closing) plan to ensure that integration and value creation are always front of mind.
Integration planning and execution
Integration planning should be undertaken throughout the transaction process. Businesses should build strong connections between the deal team and the integration team at the start of the acquisition process and maintain that regular one-team approach.
Integration planning and execution should cover every area of the business, whether it’s people, sales, operations, finance or technology. Only then will you get a truly holistic view and maximise the chance of success.
If a potential acquisition can’t be integrated effectively, you may query whether the deal should go ahead. That said there are strategic exceptions to every ‘rule’ and it is always worth bearing in mind that your own ability to integrate may be the constraining factor – in these situations making an acquisition and leaving the business as a standalone unit in your group, until integration can be achieved, may make commercial sense.
There is no doubt, that the time and investment that companies make in integration will affect their ability to create value from a deal.
The impact on exit
At the risk of stating the obvious, it is key to consider how all aspects of any acquisition affect your exit plans.
It may seem counterintuitive to start the transaction with a focus on your ultimate exit. But understanding your personal ‘end game,’ the timing of that and your personal needs at the point you exit can help provide clarity on value creation during the deal.
Summary
Businesses are improving the value created through mergers and acquisitions, but there remains much more that can be achieved if you keep value creation as a focus throughout the deal process. This focus can never begin too early.
The most successful acquirers ensure that they have a defined M&A strategy and that this sits at the heart of their business strategy. Due diligence, integration planning and considering the impact on your exit from the business can help you to focus and improve value creation beyond an acquisition.
We are delighted our Director Matthew Guest has been awarded the ‘Rising Star’ award at The Business Desk Rainmakers awards.
Matt is a key member of our team having been with us for 8 years. In that time he has been involved in a number of our most significant transactions – this is fantastic recognition for all of his hard work and is richly deserved.
We are also proud to have been nominated in the following categories:
Corporate Finance Team of the Year
Private Equity Exit
Phoenix Equity Partners and LDC exited their investment in Forest Holidays, as it was acquired by Sykes Holiday Cottages.
In the world of sports, few figures have achieved the level of success and admiration as Pep Guardiola, only further enhanced by Saturday’s treble success. Known for his innovative tactics, exceptional leadership skills and relentless pursuit of excellence, Guardiola’s achievements offer valuable lessons that extend beyond the realm of sports. In this blog, we look at what business leaders can learn from Pep Guardiola and Manchester City’s continued success.
A shared vision and common purpose
Guardiola understands that success is not solely dependent on individual talent, but rather on building a cohesive and collaborative team. He places great emphasis on team chemistry, effective communication, and a shared vision.
Business leaders are responsible for communicating the big picture, ensuring team members are on the same page and understand the strategic plan. Every successful team needs a vision that is well communicated and each individual needs to understand the role they play. Businesses should set common goals but give employees the freedom to achieve them through day-to-day individual creativity just as players are given the freedom to use their initiative on the pitch.
Preparation & planning
Guardiola’s meticulous attention to detail and dedication to preparation have been integral to his success. He places great importance on analysing opponents, understanding their weaknesses and tailoring his tactics accordingly. Similarly, business leaders should emphasise the significance of research, data analysis, and strategic planning. By understanding their market, anticipating challenges and identifying opportunities, leaders can make informed decisions that drive growth.
In any team you need to empower individuals and trust them to do the roles you have brought them in to perform. Trust between individuals comes from training and preparation. Coaches can’t get out on the pitch and play, so they set the game plan, communicate, motivate and then let their team go to work.
Whilst it’s not as possible for a business team to constantly train and prepare, we often see people being too busy with their day to day and not enough time being spent on preparation and planning. Guardiola’s meticulous approach serves as a reminder that success often lies in the details.
Recruiting a diverse range of talent
There is no doubt that Manchester City have assembled a team of highly talented individuals with a diverse range of skills, but with one thing in common, they share the vision, passion and hunger of Pep Guardiola and the wider Manchester City board. Company leaders must analyse in detail which positions are critical for their growth and develop a detailed profile for each to ensure they build depth and diversity into their teams.
In a club such as Manchester City, whilst Pep is the leader, there is no doubt that the success achieved is not down to Pep alone. Building the right support team around you, the ‘back-room staff’ is also critical in business.
Adaptability and innovation
During his years of managing top clubs, there is no doubt that we have seen consistent traits in Pep Guardiola teams. However, we have also seen him innovate and he has revolutionised the game by introducing new tactical systems, reinventing traditional approaches and taking advantage of technological advances in sport.
Pep has also shown great skill for continually developing individuals, placing them in different roles and positions to get the very best performances from them, keeping them motivated and fresh. Often when new players have come into the Manchester City squad, they have not necessarily performed at their best in the first season, Pep then helps them to adapt and fit into the wider team and allows them time to adjust.
However, with the arrival of Erling Haaland, we have seen how Pep has also adapted his tactics and changed how the rest of the team play to get the best results out of Haaland as an individual.
Whilst a clear vision and strategy is key, a business, like a football team needs to be able to quickly adapt to changing circumstances and trends. Businesses that fail to innovate or adapt, may lose their competitive advantage or see a deceleration of growth if they are slow to adopt emerging trends and technologies within a fast-changing business environment.
Continual and gradual improvement vs shake-up
Across the seasons that Pep Guardiola has led Manchester City, we’ve seen him use the tactic of gradual improvement with tactical tweaks initially to changing his strategy with a big shake up to keep his squad fresh and hungry. Out went four players in Jesus, Sterling, Zinchenko and Fernandinho who had been so integral to the club’s recent success and in came Haaland, Alvarez and Akanji to replace them.
The lesson for business here is that gradual improvements will drive change over time but also don’t be afraid of larger scale changes to drive forward.
Summary
Sport leaders such as Pep Guardiola provide not only lessons on how to improve, perform and achieve, but how to do this over the long-term in a way that is effective and sustainable.
Business leaders can learn vital lessons from the world of sport about setting goals, sharing vision and purpose as well as balancing short-term performance with long-term growth. With the right preparation, by building diverse teams and by embracing innovation and adaptability leaders can navigate an array of challenges and achieve long-term success.
The Springboard Team will be taking on The Yorkshire Three Peaks on the13th July 2023 to raise funds for Crohn’s & Colitis UK. This charity is close to our hearts as Ryan, our office manager’s brother, has suffered with this from the age of 9. We are keen to raise as much money as possible for this great charity and would appreciate if you can donate any amount big or small.
The Cause
Crohn’s & Colitis UK are the UK’s leading charity for Crohn’s and Colitis. They work to improve diagnosis and treatment, to fund research into a cure; to raise awareness and to give people the hope, comfort and confidence to live freer, fuller lives.
Unfortunately Ryan’s condition was severe meaning all treatment eventually stopped working resulting in him needing bowel removal surgery and a stoma fitted in August 2021.
After recovery from his bowel surgery and adapting to the huge change in his life, Ryan was slowly but surely starting to live a normal life until he was diagnosed with Liver Cancer in January 2022. This all stemmed from his prior diagnosis of Ulcerative Colitis.
Despite all his challenges, Ryan has been so positive throughout and we are so thankful to say the tumour was successfully removed and in February 2023, Ryan was given the initial “all clear”. He has recently celebrated his 27th birthday, is now thriving in work and beginning to live a normal, happy life as he deserves.
The Yorkshire Three Peaks Challenge
The Yorkshire Three Peaks Challenge is a 24-mile (38.6km) round trip walk, which includes 1585m (5,200ft) of ascent, to be completed in under 12 hours.
The walk takes in the peaks of Pen-y-Ghent (694 metres), Whernside (736 metres) and Ingleborough (723 metres), forming part of the Pennine range, and encircling the head of the valley of the River Ribble, in the Yorkshire Dales National Park.
A challenge not for the faint-hearted, our Team have signed up in their numbers to take on the peaks in aid of such a great cause. Participants include: Simon Ward, Robert Johnson, James Bailey, Chris Rawstron, Matthew Guest, Jonathan Wright, Thomas Hammond, Matt Wong, James Cross, Dan McCartney, Claudia Haywood, Liam Bradney, Hamza Rehman and Charlotte Higgins.
Donate here
If you would like to donate and help support the team on their challenge, please click on the link below.
We thank you in advance for your support and will update you on the team’s progress.
Written by, Robert Johnson Partner
In our pre-Budget blog, we shared our thoughts, hoping that we wouldn’t see more bad news for business in the Spring Statement. Thankfully, there was little in this Budget that was too surprising, and it certainly looks like the Chancellor is saving the ‘goodies’ for next year before an election.
In this blog we give our view on some of the announcements and the outlook for the coming 12 months.
Business Investment
It was encouraging to see the Chancellor continue to promote business investment by announcing a replacement to the capital allowance super deduction that was set to end on 31st March.
The scheme provides 100% First Year Allowance (FYA) or “Full Expensing” of the cost of certain items of plant and machinery from profits before tax in the year of purchase. Currently, this is set to run from April 2023 to March 2026, with the suggestion it may become permanent.
For those business founders continuing to invest, grow and increase business value, these changes will certainly help their plans.
EMI Share Options
Simplifications to the process for granting tax-advantaged Enterprise Management Incentives (EMI) share options were also part of the Spring Budget Statement. This will help owners to retain and incentivise key management and employees and could benefit owners looking to sell or undertake a Management Buy Out in the future.
Pensions
There was one unexpected announcement; the plan to remove the Pensions Lifetime Allowance charge and raise the Pension Annual Allowance to £60,000 from April 2023. However, for many business founders, the value of their business remains the largest proportion of their retirement funding and this announcement is likely to have little overall impact in their retirement planning.
Summary
In our last blog, we hoped that there would be no more bad news for business founders, and we believe that that this Budget will indeed prove to have been largely neutral – quite a low bar!
The ‘perfect storm’ over the last few years of a global pandemic, political uncertainty, government U-turns, rising interest rates and increasing costs have created a tough environment for many businesses. However, business founders remain resilient to tackle the challenges facing them.
We expect next year’s Budget to produce more headline grabbing announcements before a general election. A change of government at the general election may well see Labour reverse some Conservative policies and a debate around capital gain/wealth taxes seems likely if hugely unwelcome. For this reason, business owners should consider their growth and investment plans now, if they are looking to increase business value and plan their exit.
If you require advice on funding for investment, mergers and acquisitions, or business exit or sale, contact us.
Written by Robert Johnson, Partner
Rising interest rates on the back of burgeoning inflation, teetering on the edge of a recession and the
war in Ukraine have created a ‘perfect storm’ for UK business owners in the past 12 months. Now as
April looms and previously announced corporation tax increases come into effect, you could be right
in thinking as an entrepreneur that the UK Government is not exactly your friend.
With the 2023 Spring Budget on the horizon, is it too much to hope for that Jeremy Hunt may
announce something that promotes entrepreneurship, business investment and wealth generation?
Don’t hit businesses any harder
With a rise in Corporation Tax due, end of the super deduction and a tightening of R&D tax credits
we are all hoping that the Spring Budget doesn’t contain any more bad news for business founders.
A period of stability is essential
After the roller coaster that owners have experienced in the last few years, businesses need a period
of relative stability. Many are predicting a boring Budget but dullness that will be short lived with a
more headline grabbing Budget in 2024 ahead of a general election.
So, what about Capital Gains Tax ‘CGT’?
At the moment, CGT looks likely to remain unaffected, with no suggestion that this might be
increased in the Spring Budget. However, for business founders who are already considering their
exit, it is worth noting that CGT could be back in the firing line for an incoming Labour
administration.
The next election must be held no later than January 2025 and although Labour have suggested they
won’t fundamentally change the current Conservatives tax plans, CGT has historically been an area
that is seen as something of a soft target – just look at the restriction of entrepreneurs relief and
other changes.
Whilst we can all hope that a Labour government focused on economic growth, a la Blair 1997,
would surely not punish entrepreneurs by increasing CGT rates on business sales there are no
guarantees.
Summary
Our overarching message to Jeremy Hunt is one of ‘steady as she goes’ and focus on giving business
some stability. However, for business founders, a wary eye needs to be kept on the medium-term
tax outlook – that period of certainty may be short lived.
There is no doubt that 2022 was another challenging year for UK business. However, despite uncertainty, rising prices, the war in Ukraine, changes in leadership and U-turns by the Government, business owners remained resilient, and we did not see significant impacts on the M&A market.
Despite that uncertainty and turmoil, at Springboard 2022 was a successful year. We advised on 13 deals in the year with a total value of excess of £450 million – 9 of which involved private equity sponsors. A highlight being ‘Deal of The Year’ at Insider Media Midlands Dealmakers Awards for longstanding client Sykes Holiday Cottages acquisition of Forest Holidays.
In this blog we take a brief look back at 2022 and give you our thoughts on what 2023 may hold for the M&A market.
The market in 2022
In the beginning of 2022, we saw a strong start to the year with a backlog of deals continuing post COVID. As the year progressed, rising costs have impacted some business profits. However, the owner managed business market and business founders remained incredibly resilient during the year.
The political turmoil in the Autumn around the mini-Budget was another (albeit self-inflicted) blip, causing some business owners to pause, but things began to recover as we exited 2022 and we have seen enquiries and the level of M&A activity remain buoyant.
Business sales
We are still seeing great opportunities in the M&A market with lots of sales mandates going live and a significant appetite from well-funded buyers both in the UK and from overseas.
After the last few years of challenges, we still see many business founders considering their options to realise the value of their business by selling or obtaining PE backing to get support to develop their business, manage risk and provide them with an exit plan. The capital gains tax regime remains relatively benign and should also be a factor in the thinking of founders.
Funding & acquisitions
A key driver of M&A activity continues to be significant liquidity in the Private Equity market. We have several PE backed clients with a significant appetite to grow by acquisition and the desire of funds to continue to invest in their existing portfolio is as strong as it ever has been.
Sectors
We continue to see great opportunity in the technology sector. This M&A activity is driven by consolidations, innovation and the multiples in tech remaining strong.
Sectors that have a significant exposure to energy costs, for example manufacturing, where earnings continue to be squeezed will undoubtedly be impacted in the short term. However, many companies now have increasing clarity around their energy costs and are facing these challenges head on while some acquirers are (rightly) viewing this as a transient issue that can often be dealt with in the structure of a deal.
However, we are always cautious in applying blanket theories around sector multiples and business value as each business we work with is unique. There are great entrepreneurs across all sectors building genuinely innovative and disruptive businesses that will attract acquirors and investors despite the challenges and economic conditions.
The economy
It is pretty clear that the UK is facing choppy economic waters. There is much debate over the potential length and depth of any downturn, and it remains a widely held view that the UK is likely to be impacted harder than other countries. Despite this we are still seeing good levels of interest from overseas acquirers in UK assets. The impact of inflation in the coming months will continue to be felt but again we are already seeing that perhaps the peak has been reached and that interest rates should be falling soon.
Summary
The last three to four years have been some of the hardest years for the business owner and manager with Brexit, COVID, the war in Ukraine, turbulent markets and rising prices. Notwithstanding these challenges, we are confident that the underlying drivers of the UK M&A market remain buoyant.
Lastly it is worth remembering that uncertainty creates opportunity and value. This is true both in realising value and in growth via acquisition. 2023 will present these opportunities and we look forward to helping business owners and managers realise them.
Has last week’s statement created a ‘Perfect Storm’ for business owners?
It’s safe to say that the last few years have been far from plain sailing for UK business owners. Dealing with Brexit and Covid have already had a huge impact and the Chancellors mini-budget, subsequent currency crisis and rising interest rates on the back of burgeoning inflation have created a ‘perfect storm’ for UK business owners.
They say things come in threes (both good and bad…), we can only hope that Brexit, Covid and the current volatility account for the three things that business owners have had to deal with.
Business owners needed measures that helped provide more stability and certainty for the future from the mini-budget. However, the announcements have done quite the opposite. With a currency crisis and the near certainty of rising interest rates, it feels like business owners are having to ride yet another wave of volatility, which could hinder them being able to make long term plans.
Some positives to take away
There are some positives to take from the announcements the Chancellor made. Some of the measures will provide some short-term relief for businesses. It’s good to see the government focused on growth and promoting investment through initiatives like the creation of ‘Investment Zones’ across the UK.
Announcements around increases in Seed Enterprise Investment Scheme (SEIS) limits and schemes such as SEIS, Enterprise Investment Scheme (EIS) and Venture Capital Trust (VCT) being extended beyond 2025, will also be welcome news for those looking for investment.
A clearer focus on capital allowances could achieve more
Between 1995 and 2015, Britain had the lowest levels of business investment of all OECD nations. One explanation for this has been that our tax system has not fully supported investment. The UK is also falling behind its European neighbours in terms of supporting capital investment.
Whilst I applaud the government for trying to support businesses and stimulate growth, there are more targeted ways to achieve that than the raft of measures announced by the Chancellor.
With Sterling plunging to its lowest level against the US dollar since decimalisation in 1971, you could argue that this makes the UK more attractive to these overseas investors. However, whilst the cost of acquisition may be lower for overseas investors, when extracting profits from the UK back overseas, investors will see these profits devalued. The rising cost of imported raw materials because of the weak pound will also affect profits. We are truly part of a global economy nothing is that simple!
What affects will the announcements have?
Many experts predicted that Brexit and Covid would slow down the M&A market, but in many cases, we saw quite the opposite. Challenges breed resourcefulness and innovation and the UK business owner has consistently risen to that challenge. I think it’s too early to say how the announcements in the mini-budget will affect the M&A market overall.
Summary
One thing is clear it’s been an incredibly tough few years for business owners with so much uncertainty and volatility that major global events have had and I’m sure that some will be wondering whether to continue to run their business or sell.
What business owners needed was a focus on creating more stability and certainty and the mini-budget announcements have had exactly the opposite effect.
The UK government are right in trying to target business growth and whilst some of the measures offer some short-term relief, they haven’t gone far enough to fuel longer-term investment. More focus on areas such as capital allowances would encourage long-term investment and create a greater impact.
As with all major changes, there will be some opportunities. Whether you are looking at securing inward investment, selling your business or acquiring a business, if you plan, consider volatility, risk and fund appropriately, Friday’s announcements won’t stop many business owners making key decisions. Our business founders and entrepreneurs have consistently risen to the challenges of the last few years – I am sure they will do so again.
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