Selling a Company Harder Under Protectionist Mindset

M&A Specialist Assistance

Prior to the appointment of Theresa May as prime minister in 2016, the unwritten rules surrounding mergers and acquisitions remained pretty much unchanged for decades. Now things are considerably different, thanks to the current government's more protectionist stance against foreign buyers attempting to acquire British companies. To say that selling a company under a more protectionist mindset is harder is to state the obvious. So how do you build a company to sell in this kind of environment?

Mergers and acquisitions as we know them have been part of the corporate landscape for many decades. In that time, foreign investors have been coming to our soil to buy long-standing British enterprises for the benefit of their shareholders while British corporations have flexed their international muscle through their own overseas M&A activities. Things have been pretty much 'live and let live' for the longest time. Today, some of that 'live and let live' enthusiasm is starting to fade. Yet there are still opportunities to be had.

Selling a company has always been about building something that someone else wants. Whether a buyer is from overseas or Britain should not matter. If ownership and management build a solid enterprise with a good track record and a promising future, there will be buyers looking to get in when it comes time to sell. The key in a protectionist mindset is to focus building that company to make it as attractive as possible to domestic buyers.

Selling a Company, An Economic Balancing Act

The Telegraph's Ben Martin authored a brilliant piece in May (2017) discussing government protectionist policies and how these are affecting mergers and acquisitions. In his piece, he discussed that fine line the May government has to walk in order to keep the UK open for business and protect our economy from foreign invaders. According to Martin, there are both positives and negatives here.

On the positive side, the UK was the top country for cross-border mergers and acquisitions in Europe in 2016. Nearly 950 deals for both public and private companies were completed. On the negative side, there are rumours that the government plans several rule changes targeting asset stripping and tax avoidance among foreign entities looking to buy British companies.

If those rules are approved, they would require bidders in any M&A scenario to make their intentions clear during the bidding process. It would also set up a legal framework to make sure any promises made during bidding can be legally enforced after the takeover is complete.

Plenty may change with the results of the recent general election and a hung parliament. In the meantime, strategies for selling a company under a more protectionist mindset haven't changed. A successful sale depends on building a company attractive to British buyers, making a strong presentation, and then being able to work with bidders to close the deal.

If you want to learn how to build a company to sell in any political or business environment, I'm here to help.

Sources:

Telegraph – http://www.telegraph.co.uk/business/2017/05/27/fortress-britain-foreign-deals-face-government-crackdown/

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Author: Tim Luscombe

Hello, I'm Tim and I'm a specialist in corporate finance for the owner managed business. If you've been approached to sell your business, or you are thinking of buying a business or you just want to know what your business ...