WestBridge prepares for surge of deal activity triggered by Covid and tax changes

A surge in deal activity over the next few months is being predicted by private equity house WestBridge, as business owners seek to realise and de-risk their assets ahead of widely anticipated changes to the Capital Gains Tax (CGT) regime in the next budget.

There is speculation that Chancellor Rishi Sunak will hike CGT. This, combined with the April 2020 changes to Entrepreneur’s Relief (now Business Asset Disposal Relief), will have a significant impact on business owners looking to sell.

James MacLeay, investment manager at WestBridge, says: “History has shown that impending changes in tax legislation can create surges in deal activity as owner managers look to sell all or part of their shareholdings, and take advantage of a more favourable tax regime.

“But tax isn’t the only factor driving deal activity. Many business owners, especially those who’ve had a challenging time because of lockdown, will have seen their value eroded in recent months. Many are thinking about de-risking their personal finances by selling a stake to investors.

“This means they will be able to take some ‘cash off the table’ in the short term, while benefitting from the longer-term value an investor can bring to help grow the business.  

“There is a window of opportunity for business owners to transact, provided a transaction is completed ahead of any tax increases. This is a win-win scenario for a business owner and can help create future value for them that might have been lost during lockdown."

MacLeay says business owners considering introducing private equity investors need to act fast to take advantage of the current tax regime and to ensure no further value is lost in this challenging economic climate.