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BREXIT - What next for business exits?

Both sides in the Referendum debate agreed that Brexit would lead to economic disruption in the short term. Commentators differed  - and still do  -  as to how long such disruption will last.

Owner of SME’s which are export-dependent are unlikely to face short-term problems on exit because of the 2-year timetable for exit from the EU once Article 50 of the Lisbon Treaty is triggered. The longer term consequences for such SMEs are unknown and unknowable at this stage.

Such owners seeking exit routes in the medium or long term would be advised to structure their sales to take some deferred consideration by way of a turnover- or profit-related earn-out rather than dropping the upfront asking price.

For SME’s which are not export-dependent, price will be determined by theUK’s level of economic activity. However, even if exit funding is restricted by banks, newer forms of finance are emerging such as crowd funding and P2P with such players as The Funding Circle. Alternative funding can be combined with buy-ins and management buy-outs. Although these may require owners having to wait longer to receive their exit payments, they offer another alternative.

The Federation of Small Businesses states that:

“Nearly a quarter of FSB members export, with the majority exporting to the single market.          (www.fsb.org.uk  accessed 24 June 2016)

That means that three quarters do not export. If FSB membership is representative of smaller businesses generally in theUK, then the majority of SMEs in theUK should not be overly concerned about Brexit and will benefit from the loosening of EU over-regulation, even if there is some knock-on effect with some of their customers who are more dependent on exports to the EU.

We have been seeing more creatively structured exits in the last two or three years, following the last recession, ringing the changes on the traditional cash-up-front sales. There is no reason why this increased variety of exits should not support business sales as Brexit proceeds.