A surge in broker consolidation has been predicted as sellers look to avoid increases in capital gains tax announced in the Pre-Budget Report.
But there were mixed views on how the proposed changes would affect acquisition prices.
Last week the Chancellor, Alistair Darling, said capital gains tax would increase from 10% to 18% from next April.
Tax experts and broker consolidators said the changes to the tax regime would encourage brokers considering selling their businesses to do so before April to avoid the increased tax burden.
Ian Clark, corporate finance partner at Deloitte, said: “The tax change has given brokers further incentive to go early. Discussions that have been stalling will suddenly have renewed impetus.”
Clark said there would be a spate of acquisitions next February and March.
He added: “Prices won’t be affected, because there are usually a number of competing bidders.”
Mark Grice, a partner at accountant Mazars, said the changes could speed up the acquisition rush. “This has caught everyone by surprise. There could be some scuttling around come April.”
Grice said the changes to the tax regime could drive asking prices up. “Brokers will say I want more – because I’m getting less.”
Stuart Reid co-chief executive of AXA’s broking division, said: “The increase in capital gains tax will give brokers even more of a reason to consider a sale [before the changes come into effect].”
Reid said he had already seen an increase in the number of approaches from brokers looking to sell.
He predicted prices could come down in the short term: “If supply exceeds demand then, according to basic economics, prices must go down.”
Another market source said: “This will make a big difference to principals who have owned large shareholdings for more than two years and are sitting on a substantial paper profit.”
