2025 marks my 15th year as an SME business sale and exit adviser. Over this time, I’ve had the privilege of working with countless business owners, guiding them through the complex process of exiting their businesses. The landscape for business sales and exits has evolved significantly, making it far more challenging for many owners compared to five or more years ago.
In the “good old days”, a combination of favourable conditions made the market ripe for sellers. Interest rates were lower, making it easier for buyers to offer stronger deals. Financial buyers and search funds—often not the best choice for exiting owners or their employees—were far less prevalent. Entrepreneurs’ Relief (now known as Business Asset Disposal Relief) allowed business owners to sell up to £10 million of lifetime gains at a reduced tax rate. For many, it was the perfect time to sell.
Today, the environment has shifted. Rising interest rates have tightened financing options, and the growing influence of financial buyers has become a distraction for retiring business owners with deals that aren’t always in the best interests of sellers or their teams. However, one thing remains unchanged: there is still a strong appetite among buyers for successful, profitable growth businesses. For those considering an exit in the next five years, here are some strategies and routes that I believe will gain traction as preferred options. My M&A prediction for 2025.
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Employee Ownership Trust (EOT)
The Employee Ownership Trust model has rapidly grown in popularity and will continue to be a preferred exit strategy in 2025. Here’s why:
• 0% Capital Gains Tax (CGT): Qualifying business owners can sell 51% to 100% of their business to an EOT while paying no CGT—a compelling financial incentive.
• Deferred Payment Structures: Most EOTs involve a deferred payment arrangement, enabling owners to remain involved during the transition while receiving payments over time.
• Legacy and Staff Motivation: Transitioning to employee ownership preserves the company’s legacy, motivates employees, and secures the future of the business.
For business owners prioritising their team and long-term legacy, an EOT is a fantastic option.
Read more at our specialist site EOT.co.uk
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Partial Sale to a Complementary Buyer
A partial sale to a complementary trade partner or business can offer significant advantages:
Immediate Value Realisation: Selling a portion of your business allows you to unlock capital while retaining some equity for future growth.
Strategic Synergies: Partnering with a complementary business often leads to cost efficiencies, access to new markets, and enhanced operational capabilities.
Reduced Risk: Retaining a stake in the business means you can benefit from future upside, especially if the buyer’s involvement drives growth.
A partial sale is ideal for owners who want to “cash out” partially while staying involved in their business’s future.
Read more at our specialist site MERGERS.co.uk
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Trade Sale Over Financial Buyer
For many business owners, selling to a trade buyer remains the most attractive option. Here are three key benefits:
Alignment of Values: Trade buyers often understand the industry’s nuances and are more likely to value and preserve the business’s culture and legacy.
Stronger Deal Terms: Unlike financial buyers, trade buyers are often less focused on leveraging debt and more inclined to offer favourable deal structures.
Operational Continuity: A trade buyer’s expertise can ensure a smoother integration, benefiting employees and customers alike.
While financial buyers have become more prominent, their motives often centre around ROI rather than the long-term success of the business, making trade buyers a preferred choice for many sellers.
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The Importance of Exit Planning
A well-thought-out exit strategy ensures you maximise the value of your business, minimise tax liabilities, and achieve your personal and financial goals. Here are some key steps to consider:
• Valuation Assessment: Understand your business’s current worth and the steps needed to enhance its value.
• Succession Planning: Develop a roadmap that includes potential buyers, key employee retention strategies, and contingency plans.
• Tax Efficiency: Work with advisers to navigate the complexities of CGT, inheritance tax, and other financial considerations.
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Take the Next Step
While the road to exiting a business may be more complex today than it was in the past, the opportunities for a successful and rewarding exit remain strong. The key lies in understanding the market, preparing thoroughly, and working with experienced advisers who can guide you through the process.
If you’re considering a business sale or transition in the coming years, now is the time to start planning. Contact us today for a free, no-obligation review and explore how our confidential market test can help you identify the best path forward. Let’s explore the benefits of all three options.
Let’s work together to position you for success in 2025 and beyond.
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