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Mounting Debt helps fuel Solent SME business sales market

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Some owner managers who have kept their business afloat by lending their own money to the business have decided enough is enough and are looking to exit, states Steven Grant of Warner Goodman Commercial.

Coinciding with a general acceptance that the economy is unlikely to return to its former levels any time soon, debt burden has caused many SME business owners to rethink their strategy and for some, selling appears to be the most attractive option.

The Solent SME business sales market has been fairly active over the past few years and   one very visible trend is for businesses to change hands in return for repayment or transfer of debt.  This may be trade debt but more often than not there is a significant element of debt owing to the owners.  This type of sale seems to be particularly prevalent within the leisure and professional services markets.

Steven comments “Let’s be clear, we are not talking about distress sales where the sale is forced by insolvency or the imminent fear of insolvency, this is quite different.  These sales are taking place because owners have exhausted the financial resources they are willing to pump into their business.  They have either lost faith or patience.  Sales are viewed as a means of recouping some or all of what they are owed.

“We are seeing a lot of sales happen where the headline purchase price is nil.  The real consideration to the seller is often the repayment of a loan owing to them or the transfer of their liabilities such as trade debts of the business or a burdensome lease together with a release from accompanying personal guarantees.  In some cases loans made by the owner to the business are being repaid over a period of time dependant on the fortunes of the business, a sort of earn-out.

“Buyers see this type of deal as an attractive option due to the fact that they will usually require very little or no bank funding.  Sellers see it as a way of recouping their investment and freeing themselves from a stressful situation which may have become increasingly difficult to manage.”

For more information contact Steve or the Commercial Team on 02380 717717 or visit the website www.warnergoodman.co.uk.

ENDS

This is for information purposes only and is no substitute for, and should not be interpreted as, legal advice.  All content was correct at the time of publishing and we cannot be held responsible for any changes that may invalidate this article.