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The CGT Drum Beat Continues. But There's Good News Too.

Updated: Oct 7, 2020

Listening to the Chancellor, Rishi Sunak, on Radio 4 this morning telling us not to read too much into rumours of tax increases and his steadfast refusal to comment on future fiscal policy only reminded me of earlier in the year when many were concerned that Entrepreneurs Tax Relief was about to be slashed.

And slashed it was.

There seems little doubt that the Conservatives will increase taxes further. The combination of every fiscal bullet fired at the Covid-19 response and the Prime Minister's doubling down on levelling up (40 hospitals, HS2, you name it...) leave Mr Sunak little room for manoeuvre to balance the books. And his unsolicited insistence that he sees Entrepreneurs as vital to our society sounds a bit too much like buttering up to me.

So I would expect rumours of Capital Gains Tax increases to crystallise right around the next budget, now expected to be (maybe) Spring 2021. An increase in Corporation Tax would also impact projected net returns from acquisition investment models, which would also harm valuations. Let's not pretend this is good news for business owners considering selling in the coming years.

So what is the good news?

Well, with positivity in short supply from the government or health officials right now, we need to look to the (in my view, heroic) entrepreneurs, investors and even corporates.

Who are showing us that, against many quite reasonable expectations, this is a surprisingly good time to market & sell a privately owned business. And beat any tax increases.

Since the pandemic hit, Symmetry have been supporting a cautious, evidence-based approach to assessing market timing. If the market still said, as many expected, that you should hold off commencement and focus on preparation for a year, then our advice would match that.

But, in fact, acquirers in many sectors are acquiring, exploring, looking for ways to grow and searching out resilient, complementary businesses. Valuations take a pragmatic view of 2020 results, instead looking to future returns under new ownership to assess opportunities. Deals are getting done.

Acquirers aren't short of appetite or capital. They're short of opportunities. Which gives bold sellers an advantage.

The Symmetry team are seeing this trend in projects across Healthcare, Tech, Property Services and Industrials. And we have a track record of beating the clock when it comes to tax changes (ask us about that!).

So sellers considering the economics of 'now vs later', shouldn't consider the last couple of quarters' trading in isolation from other factors such as current tax regimes and M&A market supply/demand which will be just as impactful on net proceeds.

And keep in mind that the adage of 'Be Brave When Others Are Fearful' has never been more true for business owners than right now.

Jonathan Tate

October 2020

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