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Wealth Management Firms and Small Lenders Turning to Acquisitions

June 21st, 2018 by Chris St Cartmail

Wealth management firms are discovering that the easiest way to grow their assets under management is to merge with or buy another firm. Meanwhile, smaller mortgage lenders may soon be turning to M&A in response to a lack of cheap funding from the Bank of England.

Wealth managers hit by pension reforms

Back in 2015, sweeping pension reforms came into play that gave the public more control over their own pension pots. As a result, the demand for financial advice has soared. Which may first seem like good news for wealth managers. However their fees are putting a lot of potential investors off – particularly following new regulations that require wealth managers to be more transparent about what they are charging for their services.

This has left wealth managers increasingly reliant on referrals from financial advisors and the sums they are being asked to manage are more ‘Middle England’ than ‘millionaire’. Therefore, growth has become somewhat hard to come by.

M&A as a pathway to growth

Unsurprisingly, wealth managers are now buying up advisory firms as a way to grow their assets under management. A recent example is the purchase of Ascot-based Fund Management Ltd by Harwood Wealth Management Group for GBP1.1m. Fund Management brings with it some GBP34m of assets under influence and will continue to run itself as a separate firm to Harwood.

It seems that wealth managers who can count financial advisors as operating under their ownership enjoy improved profits. Paul McGinnis, an analyst at Shore Capital told the Financial Times: “Many [wealth managers] are acquiring or buying their own financial adviser businesses instead … Companies are building up their financial planning [businesses]. But those who do risk treading on the toes of the advisers who refer them clients. It is a balance.”

He added that Brewin Dolphin had increased the number of in-house financial advisors as well as launching two specific financial advice services. This was partly possible due to its 2017 takeover of Duncan Lawrie Asset Management for GBP28m. Following its change of focus, the firm reported a 15 per cent rise in profits to GBP57.6m in 2017.

Consolidation is also a major theme within the wealth management sector in response to the changes in the market. After finding it difficult to attract new customers, Rathbone Brothers announced in April that it was looking to buy Speirs & Jeffrey, which would help it to reach its growth target of 5 per cent. Without the purchase it risks missing its target of having GBP40bn of assets under management by the end of the year.

Small lenders also driven to M&A by major policy shake-up

Meanwhile, changes to the way the Bank of England supports lenders has led some analysts to predict a surge in M&A within the sector. The news that Clydesdale and Yorkshire Bank’s parent firm CYBG is looking to take over Virgin Money for an estimated bid of GB1.6bn has prompted Cavendish’s head of financial services, Duncan Chandler, to predict a rush of deals.

He explains that smaller challenger banks are suffering as a result of the removal of the cheap funding offered by the Bank of England. A slowdown in economic growth has also left small operators feeling the pinch. Chandler stated: “We expect a fresh wave of consolidation among smaller lenders to arise as economic uncertainty continues and cost pressures rise and this should be a key trend in financial services M&A over the rest of this year.”

Conclusion

Financial services business owners looking to sell should be aware of these trends and can potentially cash in on the fact that M&A has become a popular means of growth for financial businesses of all sizes. For those looking to buy, on the other hand, now is obviously a great time to acquire a financial services business that can help boost your business at a time when organic growth is sheer hard slog.

View service businesses for sale here

Top tips for choosing a franchise

May 10th, 2018 by Chris St Cartmail

If you often find yourself thinking ‘I could do a better job of this business’ then taking on a franchise could be a great move.

When starting a business from scratch there’s always a long way to go before you have an established place in the market. However, with a franchise, you’re buying an established name, with established operational, sales and marketing procedures that are proven to work. You are also buying a whole range of support and training opportunities for yourself as a business person.

However, it isn’t always plain sailing and the British Franchise Association has put together a list of priorities to consider before taking the plunge and buying into a franchise.

1. Take into account all the costs involved in running the franchise, not just the initial buy-in amount, and ask if you can really afford it. You’ll need working capital to keep the franchise running on a daily basis and you will have to pay a percentage of your sales income to the franchisor each month.

2. Talk to existing franchisees in the network. You should have access to other people working within the franchise network you are interested in. If you are only given one name, be cautious.

3. Make sure you are offered the right level of training. If you feel you will need to undergo training in order to make a success of the franchise, make sure this is included and offered.

4. Ask a franchise lawyer to check over your contract. This is a no-brainer really and could help you to save valuable time and money in the long run.

5. Ensure you understand the franchise. Do some research on how the franchise works and what is involved in running the business. You will need to have experience or an aptitude for the kind of business and work involved. Go for a franchise that appeals to your personality and your professional experience.

Taking on a franchise can be a fast route to success for those looking to start their own businesses. However, ensure you take advantage of the support offered by the British Franchise Association to help you make the right decision and advise you on your journey.

Is Britain in the midst of a takeover boom?

May 2nd, 2018 by Chris St Cartmail

The end of April represented a crescendo in what has already been a year packed with deals involving UK companies. Excluding the value of the mega-merger proposed between Sainsbury’s and Asda which was unveiled just at the end of the month, there have been more than £200 billion worth of deals struck involving British firms.

According to Thomson Reuters data compiled just before the supermarket chains announced their deal, there have been 35 such transactions carried out since the start of 2018 totalling around £204 billion. If withdrawn bids are also considered, an extra £8 billion of mergers, acquisitions and other transactional deals have been proposed for UK companies.

This is far lower than activity seen in previous years: in 2015, the first four months of the year saw £74 billion; in 2000 – just before the internet bubble burst – £104 billion was reached.

Not only do these deals see UK companies consolidating their position in the market or merging with rivals, but represent the country’s largest firms becoming the target of overseas organisations. Shire’s £46 billion offer from Takeda, a Japanese rival, is one of these, the fifth offer made for the biomedical firm. Then there’s US giant 21st Century Fox’s bid for fellow broadcaster sky.

Some represent larger groups splitting off into more profitable units, such as Whitbread’s announcement that it would spin off Costa Coffee after pressure from shareholders who saw demerging the coffee chain as a profitable move.

According to David Lomer, co-head of mergers and acquisitions for EMEA at JP Morgan, this stream of activity – “one of the busiest starts to a year ever”, as he puts it – is set to continue, both in terms of the size of transactions as well as their number.

This is largely because “boardroom confidence is high”, Lomer explains, and because an appetite to make deals in order to seek better corporate value is growing around the world.

British companies also represent something of an attractive proposition to a buy who has enough cash to find their next growth opportunity. “British companies’ answer to Brexit is to get stronger domestically and also to grow internationally,” he explains. “Overseas companies are seeing past the noise and uncertainty surrounding Brexit and have refound their belief in the value of UK assets.”

Not everyone agrees with Lomer’s assessment of the market conditions, it’s true: Warren Buffett, a veteran Wall Street player, recently said that a “sensible purchase price” was hard to come by – speaking about the opportunities open to him in the US.

Looking at British firms, however, Lomer says the opportunities for savvy buyers are becoming bigger and broader, particularly those seeking consolidation in a competitive market.

Spikes in the retail sector, in particular, are showing that although some companies are finding trading conditions a little more difficult, there is an opportunity for companies with a unique business proposition to find their niche and grow into it. The losses incurred in recent weeks by brands like Prezzo or Pizza Express may make for worrying reading on first impressions, but also belie a market that is underserved or undervalued. For the right buyer, it could represent a fantastic opportunity.

So, just as city bankers have welcomed this recent flurry of activity, Britain’s business owners may soon be realising that growth is well within their reach.

Advice for one in ten small businesses under HMRC investigation

April 26th, 2018 by Chris St Cartmail

According to a new statement from HMRC, 10 per cent of all small businesses in the UK are being investigated by the organisation. As a result of this realisation, the Institute of Chartered Accountants in England and Wales (ICAEW) has published some advice for businesses who find their financials are being scrutinised by the tax office.

Many of the investigations have been sparked by compliance tests being undertaken on VAT returns, self-assessment returns and corporation tax returns. If there is something that stands out as being unusual, HMRC will look further into the business.

The primary piece of advice is to ensure that your record-keeping is water-tight. Making sure that you keep receipts of all business sales and purchases will mean that you can provide this information to HMRC quickly if requested.

The ICAEW adds that businesses that are being investigated will usually receive a phone call lasting around 15 minutes during which HMRC will try to establish whether a business is keeping up with its legal obligations with regards to tax. HMRC will usually decide if further action needs to be taken following the call.

Clive Lewis, ICAEW Head of Enterprise, said: “Legally businesses have to keep records for income, VAT and employees. If HMRC announces that they are looking more closely at a company it can be both daunting and frightening for the business owner. If you are worried please contact an ICAEW Chartered Accountant for a free consultation using the Business Advice Service.”

The news that so many small businesses are under investigation at the moment has prompted some to criticise the current system. MP Stewart Hosie, for example, says that chasing small businesses for their invoices and receipts isn't a great use of HMRC time and that there should be more help for small businesses to get their tax filing correct.

“Wouldn’t it be so much easier if they [small businesses] could go to the local tax office with their accounts and have them checked before submitting,” he said.

Consumer trends that could inform your business purchase

April 18th, 2018 by Chris St Cartmail

There are a number of interesting consumer trends emerging of which entrepreneurs and business buyers should take note. Opportunities abound for the right business people to respond to these trends with innovative products and services.

Tech-assisted living

It’s hard to ignore the increasing presence of voice activated systems in our homes, with children’s first words all over the country being “Alexa.” Ok, so maybe we’re not QUITE there yet, but we are all becoming used to these tools around the home. Incorporating AI into our everyday lives is becoming the norm and those with an eye on consumer trends will already be investing in this area.

Gardening – indoors

Gardening is quickly becoming one of the favourite pastimes of the young. Instagram is filled with pictures of flowers and plants and the renting generation are finding solace in their tiny yards and window boxes. The emergence of technology developed to help people cultivate plants indoors has also helped to transform the market for those without outdoor space or those living in very urban environments.

Socialising without booze

I know, it seems crazy, but it’s happening! People are increasingly socialising without the aid of alcohol and the leisure industry is responding, alongside the food and drinks industry. If you are looking at starting or buying a leisure or food/drinks business, ignore this trend at your peril.

Buying second-hand

Spurred by concerns about the impact of consumerism on the environment, the public are increasingly interested in buying all sorts of items second-hand. Online buying and selling sites are booming, alongside the second-hand car market, which has never before enjoyed such a golden age. Those looking to buy businesses should bear it in mind that consumers are no longer willing to blindly accumulate goods without thought as to how this might impact the environment around them.

Government proposes changes to Entrepreneurs Relief

March 20th, 2018 by Chris St Cartmail

entrepreneurs relief UKThe government is close to making changes to Entrepreneurs Relief that could save you a considerable amount when selling part of your business.

As it stands, if an entrepreneur’s shareholding falls below 5 percent after they issue new shares in their business, they are unable to avail themselves of Entrepreneurs Relief. This has long been a bugbear of hundreds of successful people who have felt they are being penalised for their business’s success. Read the rest of this entry »

Why Amazon has sparked a wave of online food store M&A

March 15th, 2018 by Chris St Cartmail

Going to the supermarket is turning out to be a 21st century activity, if the latest industry trends are to be believed, with the world’s largest companies moving to pick up companies that offer online home-delivery services for groceries. In an age when anything, from cars to brussels sprouts, can be purchased via an online marketplace, why should the weekend shopping be any different?

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Almost a quarter launch businesses with a sale in mind

February 26th, 2018 by Chris St Cartmail

Almost a quarter of entrepreneurs starting their own businesses do so with the aim of selling the business at a later date.

This is according to a new study by business financial planning service, Jazoodle. It found that 23 per cent of those starting their own companies have their exit as their primary aim, with 83 per cent of these claiming that selling at a profit is their main motivation.
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Luxury tearoom and B&B business for sale in Ludlow

February 26th, 2018 by Chris St Cartmail

Many of us dream about quitting the rat-race and setting ourselves up with a nice café, B&B or guesthouse business in a beautiful area. Well they don’t get much quainter than this – a luxury B&B, tearoom and restaurant in Ludlow.
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Renewable energy sector ripe for M&A activity

January 30th, 2018 by Chris St Cartmail

There has been a significant shift towards renewable energy investment in recent years and the appetite for buying and selling businesses within this space is growing all the time.

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