Surge in management buyout enquiries after Chancellor's CGT hike

SME-focused investment group YFM Equity Partners said it had seen a 300% increase in enquiries from businesses about management buyouts (MBOs) since last week's Budget and the hike in capital gains tax (CGT).

The increase in CGT has created a "pressing need" for many business owners to reassess exit strategies, with MBOs now viewed as an effective way to mitigate potential tax implications, said YFM.

An MBO is a type of acquisition, in which a company's existing managers acquire a large part, or all, of the company.

YFM noted that tax planning had now become the main driver of these MBO enquiries, marking a significant shift from previous motivations, such as retirement or the absence of family succession plans.

"It's understandable that the pace of exits has picked up as business owners are reviewing their tax options at this stage," said Jamie Roberts, chief investment officer at YFM Equity Partners.

"However, as with any financial decision, careful planning is essential.

"We advise business owners to seek professional advice when evaluating their options to ensure they make the best choices for their individual circumstances."

YFM said that by working alongside advisors, it helps ensure that management buyouts align with long-term goals, providing the expertise needed to navigate what can be a complex financial decision.

In the Budget, Chancellor Rachel Reeves revealed that the basic rate of CGT would rise to 18% from 10% and the higher rate is now at 24%, compared to 20% previously.

Notably, the Autumn statement also set out a phased reduction in the so-called Business Asset Disposal Relief (BADR), which will see a rate rise to 14% from April, 2025 and then to 18% in April, 2026.