UK SMEs boost buyouts

UK SMEs under 10 years old are less likely to suffer family succession issues, than those that have been in business for over a decade, according to Grant Thornton’s European Business Survey. This means they are more likely to sell out to a private equity firm, suggesting an increasing opportunity for UK buyouts. Only five per cent of younger businesses expect to hand down the business to a family member, compared to 22 per cent of older companies.

The survey reveals a shift in business attitude means younger companies are more open to allocating business stakes to outside investors and management executives and are less likely to have family members as shareholders.

Andrew Godfrey, Grant Thornton’s head of international and European services, said: “Younger firms clearly aspire to build capital for their owners more quickly than in the past, rather than building the traditional family’ business to hand onto the next generation. They are therefore more open to outside finance and outside shareholding if that will help achieve their goal.”

Chris Hemmings of PwC private equity advisory team agrees. “In the UK, there is more of an attachment to profit, than the desire to pass the business onto a member of the family.” He cites in particular the technology companies created in the boom over the past ten years as prime buyout candidates, as they do not have the emotional or psychological ties that come with handing over a traditional family business.

Andrew Godfrey says: “Perhaps these 21st century entrepreneurs see greater opportunity and business success lying outside the framework of family relationships, particularly when it comes to opening share holdings and seeking funding.”

Hemmings adds that there are still a huge number of traditional family-owned businesses in continental Europe, reluctant to sell out to a financial institution. But he says there is less reluctance in the more mature UK market. “There is a superb opportunity for buyouts from family businesses, but this will develop slowly and over a longer period of time. Corporate divestments are still going to be the main fodder for buyouts.”