Corporate Finance Monthly Newsletter

It’s been another incredibly busy month for the team. We are pleased to announce that we have supported on multiple engagements for October with our clients including, but not limited to:

• Charlise (a transport company) – Financial due diligence project
• Property Risk Inspection (land surveyors) – Assist the client with the sale of their company
• Clarkson Hyde (an accounting firm) – Financial due diligence project
• Showcase Interiors (furniture dealers) – Valuation of business and structure a successful MBO
• Plantexpand (plant and vehicle repairs) – Valuation project for a private equity back business
• Systema (an investment company) – Valuation project

Our success was down in part to YOU and the referrals we receive. We are very grateful for the 11 referrals we received during October with work ranging from valuations, buy-side due diligence, sell-side due diligence and EMI schemes.

Despite this, we always have spare capacity and are eager for more referrals.

Team meetings

To ensure we keep everyone updated in terms of what we are doing as service line, we arranged Teams calls to go through in more detail about our offering and how to broach the subject of succession planning with clients. Should you have any further queries on the back of this, please don’t hesitate to get in touch.

Budget

The long-awaited Labour budget occurred on October 30. The main rate of capital gains tax (CGT) increased with immediate effect from 10% to 18% for basic rate taxpayers and from 20% to 24% for higher rate taxpayers, aligning with the existing CGT rates for residential property. The 10% rate under Business Asset Disposal Relief (BADR) has been retained for the period to 5 April 2025, increasing to 14% from the 6 April 2025 and then to 18% from the 6 April 2026.

Based on these changes, for some clients this may mean they will want to accelerate their plans to exit their business, so again when interacting with clients be sure to make them aware. The above changes in CGT rates may also encourage clients to look and Employee Ownership Trusts (EOT), especially where a sale of a business is not going to be in the near future, which is an area we can provide advice.

The changes in CGT will impact the net benefits delivered to employees under the tax beneficial share scheme Enterprise Management incentive (EMI), however these will continue to provide a highly tax efficient structure through which to deliver rewards to UK employees in the longer term compared to cash remuneration subject to income tax rates and National Insurance, and therefore we should be make clients aware of such schemes.

The changes announced yesterday are unlikely to discourage ongoing deal activity and may accelerate deal flow for those trying to execute a transaction before the 5 April 2025. The bigger impact on the deals market is likely to come from the increase in Employers National Insurance and national minimum wage and the subsequent impact on underlying earnings and valuations.

If you have any queries on how the changes yesterday effect your clients, or if you have queries from clients in relation to this, please get in touch.

Funding

Interest rates held steady at 5%.

When preparing accounts and collaborating with clients if we see interest rates on existing debt looks high, or the debt is not suitable for the client in terms of there being cashflow issue, or not suitable for their growth plans or is up for renewal then let us know.

If the interest clients are paying across the different types of facilities is greater than the following, please contact us to see if there is a better product for them.

• Invoice Finance loan – above 3% plus base

• Business loan – 9%+

• Commercial mortgages – 7%+

• Vehicle finance/Asset finance – This changes a lot dependent on the asset but anything above 7%

Succession/exit planning/Sale mandates

One of the key areas we would like to assist clients with is to discuss with them their plans for the future and how they intend to exit the business, whether that that is to sell the business, orchestrate a management buyout, or simply close the business down when they want to retire.

Ideally, we get the opportunity to speak to these clients as early on in their journey as possible to give them the right steer, so when you speak to clients whether as part of a pre year-end tax planning meeting, accounts finalisation meeting or a casual chat consider asking them at the opportune time what is their future strategy? If you are not sure about to approach this, please do not hesitate to reach out to the team.

New Joiner

Adam Croft has joined the department on November 1 as Director of M&A. He will be based in Cambridge and brings a wealth of experience from the KPMG Deal Advisory team. He will be supported by 2 additional new joiners on November 11 as we continue to grow our team.

Technical note

In our newsletters moving forward we will add a section in relation to providing some insight into some of the technical areas we are involved in and thought it would be good to share some knowledge in relation Enterprise Management Incentive (EMI).

Initially you may think that EMI has little to do with the Corporate Finance team, however we see EMI schemes as a key part of succession planning. EMI acting as the glue to ensure companies can attract and retain key staff, which can mean this makes the company a more attractive proposition in the context of either a private equity or trade sale, as the business will have a strong management team, and may mean less reliance on owners of the business. Having an EMI scheme could ensure that management team are retained to orchestrate a management buyout.

Our view is that EMI schemes should be considered for most businesses which are looking to retain and attract staff, on the basis the company is qualifying. There are some trades which are not qualifying trades, such as farming property development and offering legal services.

How we assist with the process is undertake a valuation of the company to establish an exercise price, and once agreed with the client obtain HMRC approval of this valuation. Working with the tax team we ensure the scheme is reported correctly to HMRC in the specific time frames which you have to work within. One of the other key parts of establishing an EMI is communicating the structure to the recipients of the structure to ensure it is fully understood.

If you would like to know more about EMI schemes, and how to approach these conversations with clients, please do not hesitate to speak to the team.