I spend most of my time in the United States these days, running my private equity company and coaching the more than 2,000 members of the Business Buying Accelerator.
I’m back in the U.K. at least once per month and keeping tabs on what’s happening with Brexit.
This is not a political post. I have my views on the government and Brexit in general, but I want to explain what it means for buying a business.
Whether you voted “Leave” or “Remain,” if you want to buy a business, it’s a massive opportunity.
Brexit will not make a difference to the U.K.’s ability to trade. Just because we leave the EU makes no difference to businesses and consumers. More importantly, they will still need to buy the same products and services.
However, what makes Brexit an opportunity can be summed up in just one word…
Back in 2008 when I closed my first individual leveraged buyout deal, the U.K. (and the rest of the world for that matter) was in the beginning of the global financial crisis. That event created massive uncertainty and tons of business owners decided to sell.
The problem, however, was macroeconomics — supply and demand, if you like.
Irrespective of how good or bad the businesses are, valuations will go way down when many more businesses want to sell than there are buyers that want to buy.
And not only that, but in periods of massive seller uncertainty, the amount of cash the seller is prepared to take at closing comes way down, sometimes to nothing.
So think of it this way…
- Brexit has created massive uncertainty
- Leave or Remain, it makes no difference to the prosperity of the U.K.’s small-business sector
- Businesses and consumers will still continue to buy
- Valuations will drop significantly as many more businesses will be available to buy
- Deals financed 100% by the seller will be the norm.
I expect this trend to be in place between now and late 2021.
So strike while the iron’s hot — it’s only just begun to burn.
Until then, bye for now.
Editor and co-founder, Dealmaker Wealth Society