What the Autumn Budget means for M&A and restructuring

Mark Naughton, corporate finance partner, and Matt Whitchurch, partner in the financial advisory team, at specialist business advisory firm FRP in Bristol, review what the looming Autumn Budget might mean for businesses when it comes to M&A and restructuring.

We’re now just weeks away from the Autumn Budget.

The run up to any major fiscal event can be a crunch time for businesses – particularly when it comes to M&A – as management teams rush to get deals over the line ahead of potential changes.

And this year is no different. Across the South West’s dealmaking community, specifically its legal advisers, we’re seeing an uptick in activity as parties try to close transactions that are already underway before the Chancellor takes to the despatch box.

Taxing considerations

Behind much of this activity is the prospect that the new government could increase Capital Gains Tax (CGT) – a move that could decrease the return on investment for business sales received by owners, management teams and investors.

Speculation around CGT reform is common every time a fiscal event comes around. But it is taking on more prominence now in an environment where the government that has already warned of budgetary shortfalls and ‘tough decisions’ ahead. While we don’t know exactly what will happen, we can be quietly confident that taxes won’t come down, and the Chancellor has certainly not ruled out using CGT to increase tax revenues, as she has other areas of tax policy.

Don’t rush now

Some management teams will have been waiting for more clarity from the government over its plans before pressing ahead with a sale or exploring other strategic options.

If this is you, it is important to be realistic given where we are in the month.

There is likely not enough time to get a full sale completed before the Autumn Statement on October 30th, unless you have a buyer already lined up with the financing in place to be ready to go immediately. If you’re being told otherwise, we’d recommend you seek a second opinion.

That being said, it might still be worth speaking to an adviser to ensure you’re on the front foot for any future M&A plans. They can help run through the various options available to you, across the full range of scenarios, and start to take steps to make sure you’re able to move quickly when the time is right – and pending any changes.

In some cases, waiting until after the Autumn Budget, once any changes are understood, could actually act in an owner or management team’s favour by enabling them to make more informed decisions based on known knowns, and not speculation alone. And, even if CGT changes are announced, there could still be an opportunity for transacting under the current rates if any new policies are scheduled to take effect from the start of the new tax year in April 2025.

While this too might be tight for a sale, it at least gives greater breathing room for a more orderly sale process with a longer, more-considered approach.

Restructuring

The same advice, not to rush but to start planning applies from a restructuring perspective too.

Generally speaking, fiscal events like an Autumn Budget don’t have a significant bearing on businesses in restructuring scenarios. Usually, the timing of action they need to take depends on operational pressures and their cash runway, rather than tax rates and allowances.

The exception could be with solvent liquidations, where the funds returned to shareholders are taxed as capital, rather than income, with gains measured and subject to CGT which can potentially be reduced further if Business Asset Disposal Relief applies.

As with M&A, it’s likely too late to complete an orderly liquidation in the time remaining before the Autumn Budget. But investors, shareholders and management teams considering this course of action should start to think about when the next best time will be and to prepare accordingly. They also might find that there’s a window post-Autumn Budget where they have the advantage of knowing the direction of policy, and more headroom to put a better-paced, more controlled plan in place .

For more information on how support from a specialist business adviser can benefit your organisation and to discuss how the Autumn Budget could affect your plans, email mark.naughton@frpadvisory.com or matt.whitchurch@frpadvisory.com, or speak to a member of the team at 0117 203 3700.