Pat Abel of Hart Shaw hopes local businesses can play their part to get the country back on its feet
Whatever you have done this summer, be it managing to catch a flight to the continent or having opted for a ‘staycation’ like myself (admittedly somewhat enforced by a change of heart by the government on FCO travel advice!) I hope you have had the chance to refresh yourself as we close in on the final quarter of 2020 – traditionally the run in to Christmas is a good time for doing deals prior to the Christmas holidays.
It has been a year of mixed fortunes so far in terms of corporate finance activity. When lockdown was announced we had a couple of deals reaching the due diligence stage and that looked likely to be completed by the summer holidays, well Covid-19 had other ideas and those deals are now on the backburner!
Hopefully, as we come out of the pandemic they will be in a position to progress, but having had up to six months negative impact on businesses in terms of income and profitability, it may mean such deals will not be ready to go again until next year. On a more positive note, we have helped a number of local businesses to secure CBILS loans with 100 per cent success rate and have assisted with several distressed sales saving jobs along the way.
I regularly hear owners of businesses saying that they need higher valuations to get them to sell “because if I hold onto it a few more years I could have earned that amount of money and still have the business to sell” – my typical response is that the money you receive ongoing is heavily taxed so you might only see 40 per cent of the money that you take out each year, whereas in a sale and with entrepreneurs relief in place, you would get all the cash now and at 10 per cent effective tax rate.
This therefore reduces personal risk and protects you from potential economic or business threats such as new technology, new competitors, recessions, global banking crisis, political uncertainty and now added to the list global pandemics!
I have been through a number of economic shocks and they all create opportunities for some and threats for others, at the minute it is a buyers’ market, so opportunistic buyers will do very well.
So, as the old Latin phrase goes and rather aptly the motto of the British Army’s Yorkshire Regiment – Virtutis Fortuna Comes “fortune favours the brave” – let us hope that the worst is now behind us and that local businesses can play their part in helping to get the country firmly back on its feet and flourishing again.
Patrick Abel
Corporate Finance Partner
Hart Shaw LLP
