MANAGEMENT buyouts at family-owned Scottish businesses have soared on a double-barrelled boost from recent changes in capital gains tax and the credit crunch, leading financial organisations have revealed.
Scottish family-run businesses rushed through sales to cash in ahead of the April 5 deadline for the lower 10 per cent rate of capital gains tax being abolished by Chancellor Alistair Darling.
That rate was replaced by a controversial broad standa
rd rate of 18 per cent which many business organisations said discouraged entrepreneurs.
David Gwilliam, regional managing partner for Scotland and northern England at accountancy group Baker Tilly, yesterday told The Scotsman: "There has been a huge impact on the MBO market as a consequence of the capital gains tax changes.
"We have seen double the MBO opportunities currently than over the past couple of years. Individuals wanting to capitalise on the old rate has paved the way for the boom."
Gwilliam added: "We have had the biggest run ever on (business] sales coming to the finish line before 5 April. Although that pace has now slowed a bit we still have some on the stocks.
"You have to say the pace of the decline of younger members wanting to take on the family businesses in Scotland, which was already a marked trend, has also accelerated because of these capital gains tax changes."
Jack Ogston, head of acquisition finance at Clydesdale Bank, has also found that the changes in capital gains tax had stimulated MBO activity.
"People who have not previously thought of selling their businesses, a management buyout or a partial exit, have read about the capital gains tax changes and it has definitely stimulated and activity," Ogston said.
A further boost had been given to the MBO and management buy-in market in Scotland by the credit crunch since last summer, Baker Tilly said.
Gwilliam said private equity groups were still interested in buying out family-owned firms "but don't want to use up all their liquidity in current difficult markets. They don't know how long the credit crunch will last".
It made staggered management buyouts, with the owner of the business taking a chunk up front, but the rest "over 24 to 36 months" more attractive, he added.
The full article contains 382 words and appears in The Scotsman newspaper.
