The credit crunch could prompt brokers to sell, notwithstanding the hike in capital gains tax
Although the changes to the capital gains tax regime sparked a flurry of acquisitions at the end of last week, the general consensus appears to be that there are greater worries for those looking to acquire. The difficulty in raising sufficient funds in a tough credit climate will restrict big private equity deals – such as that seen when hedge fund Och-Ziff bought a £100m stake in Towergate at the end of last week – to a greater extent than the unwillingness of the acquired to give up 80% more in taxes.
But with the 10% tax rate retained for capital gains under £1m, could this provide the motivation for a greater number of small-scale acquisitions – especially in light of tougher business conditions? Managing directors at small, regional brokers, perhaps looking to boost their pension and perhaps afraid of recession, may seek to sell up in the ever worsening business environment – and take early retirement.
Consolidation in the insurance market will continue, wise or unwise, as entrepreneurs try to keep profits up. This could be one area of interest in the future.
