Interesting Times!

Insights by Peter Watson.

The Budget has ended up being not quite as bad as we thought it might be as regards Capital Transfers… but still an increase in CGT rates for owner-managers (and the sellers of all shares).

I won’t go over the details – we have all been inundated with Budget briefings. Our personal take is that disaster has been avoided and the sale of a business will remain a financially life changing event.

We set out last month why it is so important to create an environment for entrepreneurs to thrive. Business has undoubtedly taken the lion’s share of the tax increases and the extent to which this will seep down to employees is a matter of discussion. From an M&A perspective we would expect profits to be lower, so monetary valuations may come down slightly, though we don’t expect multiples to be affected.

The Budget coincides with the publication of our six-monthly M&A report for the UK software and IT services sector (see below how to get your copy). Activity levels for the first half of 2024 have broadly remained consistent with H2 2023. We suspect that there may be a rise in activity for the second half of the year as many business owners tried to complete by 30th October to avoid a potential increase in CGT rates. For smaller businesses this flurry may continue into 2025 and early 2026 to avoid increases in Business Asset Disposal Relief rates.

Perhaps even more important than any Employer NI rise is the impact of AI on the businesses and “working people”. Microsoft have recently published results showing record sales of AI, worth nearly $10bn per year. This makes it the fastest-growing Microsoft product category EVER to reach that level.

We may be worrying about tax, but the real impact on the economy may be from elsewhere. An opportunity or a threat? Reminds me of that (purported) Chinese curse “may you live in interesting times”.

To request your free copy of our M&A report for the UK software and IT services sector you can reply back to any email you have received from us, or, if you are not already on our emailing list then please complete the form here: www.prismcorporatebroking.com/report