Business development · 18 April 2017

Selling a business post-Brexit – how prices will be affected

Selling a business post-Brexit
Selling a business post-Brexit

Have you been thinking about selling a business, but holding fire to await the implications of Brexit? Here’s why selling a business post-Brexit may just be a great time to sell, after all.

If you own a small business but are looking to sell, you may have been mulling over how your price is likely to be affected by Brexit.

The UK has seen some very tumultuous times over the last few months, following the vote in June and the triggering of Article 50 a few weeks ago.

The pound has nosedived, bobbed back up and continued to remain in flux, and we are none the wiser about how our trading partnerships will look with Europe in years to come. In all the uncertainty, steering a small business has been more of a challenge than ever – especially for those that are deeply involved with our European neighbours.

We caught up with former serial entrepreneur, now professional mentor, Philip de Lisle to find out how things might have changed, if at all, since the referendum.

Selling a business post-Brexit: The immediate aftermath

“I suppose there was a very small hiatus around the referendum, and I think for people who were nearing retirement age one or two probably thought it was time to go,” said de Lisle.

“But the reality is, selling a business is not something that happens overnight. From the day you put a business up for sale, you’re looking at between six and 18 months, so actually you’ve still got to run the business in that time.”

De Lisle is very positive about post-Brexit opportunities for businesses looking to sell, and doesn’t believe the market has been unduly affected by the vote to leave the EU. However, he warned that it is a “buyers’ market” and always has been – only around 15 per cent of businesses on the market in the UK actually sell.

For this reason, de Lisle said, it is important that business owners ensure they are exit ready, regardless of Brexit. This much, at least, has not changed.

“Don’t just put your business on the market and expect somebody to come and take it off your hands. You’ve got to do some work, and the biggest, more important thing, is that the business has got to run without you,” he explained.

“If the business can’t run without you, the owner, then the new owner is not going to let you go anywhere. You’ll be tied in for a certain period to make sure that the business performs as you say it’s going to perform.”

The key to making your proposition attractive to a potential buyer is to build a strong management team and cultivate steady numbers. Any sudden movement or dips in profitability is going to be a warning sign to risk-averse investors.

Selling a business post-Brexit: The global playing field

Since the vote, one thing that has affected business the most is the changing strength of the pound. This has been a blessing for some and a curse for others.

For those business owners that export products, the pound being cheaper means their products are more competitively priced and therefore more attractive to foreign buyers. However, for those that import to the UK, their money is worth less than before and their costs have risen.

So how does this balancing act affect you if you are selling a business in the UK to a foreign investor?

“If you’re based in the UK and putting your business up for sale in pounds, provided you get the number you’re after you’re no worse off at all yet the buyer gets more value for money,” explained de Lisle.

“It’s very much a win-win situation, that’s why the market is so buoyant. It’s certainly not sinking.”

In other words, it is of course entirely possible that Brexit has affected businesses’ trade – especially if they operate on a global scale.

If this has affected your order books and profitability, this may influence the price you can charge when you put your business up for sale – but if you find the right buyer, there’s every chance you can turn the weaker pound to your advantage.

Selling a business post-Brexit: For the uncertain times ahead

It is still hard to predict what the future looks like for small UK traders, but de Lisle remains positive.

“Britain has historically been one of the greatest trading nations on Earth, and if the European markets look like they’re drying up because the EU is putting tariffs on etc., we’ve got the Commonwealth to look at. There’s India, which is a huge market, there’s South America, there’s all sorts if you’re in the export space,” he said.

“I have always been very positive around what GB PLC is capable of, and if you’re looking to sell your business you must just start the preparation early.

“It really is just prepare, prepare, prepare.”

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Letitia Booty is a special projects journalist for Business Advice. She has a BA in English Literature from the University of East Anglia, and since graduating she has written for a variety of trade titles. Most recently, she was a reporter at SME magazine.