Q: I am thinking about selling my company and there seems to be interest from overseas buyers. Is this a trend you are witnessing, is the interest likely to be genuine and what is the process?
A: The latest official figures show the value of foreign direct investment in the UK (inward investment) increased from £1,032.5 billion in 2015 to £1,199.5 billion in 2016 – largely explained by a pickup in inward mergers & acquisitions. Most was attributable to Europe, but US buyers have also been acquisitive.
This is partly due to Brexit with a weakened UK Sterling as it gives potential opportunities to pick up very good UK companies at a more favourable price.
When looking to sell a company there are many considerations. Look for more than one buyer be that in the UK or overseas as this can help drive up the price through competition. For owners of UK businesses interest from overseas extends the scope but there may be additional considerations down the line due to currency fluctuations.
Consider also what you are selling whether shares in your limited company or its trade and assets. Both have very different tax consequences. You may qualify for capital gains tax relief – entrepreneurs’ relief – if you are a sole trader or partner selling part or all your business or its assets, or you control at least 5% of a company. The relief effectively reduces the capital gains tax rate to 10% on the first £10m of gains you make over your lifetime from selling such assets. Any gains above this are taxed at 20%.
Appoint a lawyer to deal with the legal side. Alongside your accountant they will help you through the due diligence process involving questions around the financials and various legal contracts within the business.
Hopefully then the deal will go ahead. You may be required to stay with the business for a period to ensure a smooth handover but after that you should be able to ride off with your money.
A warning: selling a business is rarely an overnight process. Keep your eyes on the business to ensure it does not lose business during the process.
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