SMEs shelving takeovers as sales sink and soar

The pandemic has put the hopes and dreams of small business owners on hold.

Almost two in five small and medium-sized enterprises (SMEs) were hoping to sell their firm within the next two years. But Covid has stopped many in their tracks and nearly half have shelved their plans. Research from Nucleus Commercial Finance found a quarter of those hoping to sell up are having a rethink because finances have been hit. A fifth have stalled because the value of their business has fallen.

But a fifth are reassessing because business is better than it was before the outbreak.

The research also revealed small business owners have no desire to step away from the company after the sale. Nearly seven in ten still wanted to be involved.

Selling to a competitor and remaining at the business was the option favoured by one in four, while one in 10 wanted to sell to a family member and stay onboard.

Chirag Shah, chief executive at Nucleus Commercial Finance, said: “SME owners across the country have faced their toughest few months since the global financial crash. Not only has Covid-19 significantly impacted the day-to-day operations of their business, but now with increased market uncertainty, many business owners have been forced to re-evaluate future sale plans.

“Reaching a point of sale is a huge milestone for any business owners, requiring both sheer determination and time. As such, the delay to this process is a big emotional burden, in addition to the ongoing financial and operational challenges they are already facing.

”Looking ahead, business owners need to think carefully about their strategy and, crucially, how to reach a point of sale again.”

For those who paused a sale, the average delay is expected to be 17 months as many owners said they needed to invest a decent amount to get to that stage again.

In order to fund this investment seven in ten will be using external finance, with the rest planning on taking out a loan from an alternative lender or a bank loan.

The top reasons for taking on loans were product development, taking on staff and investing in tech.