Episode Transcript
[00:00:02] Speaker A: Welcome to the Dealmaker Uncut Podcast where we speak to some of the UK's most exciting entrepreneurs and hear their investment journeys. We'll discuss the challenges, successes and lessons they've learned along the way with expert deals commentary from Jonathan Boyers, Head of Alvarez and Marcel Corporate Finance and me, Chris McGuire, executive editor at Business Cloud.
Welcome everyone to this very special episode of the Dealmaker Uncut Podcast with Alvarez and Marcel. Today, multi award winning Dealmaker himself, Jonathan Boyers will be giving his view on Rachel Reeves budget. I might give a view or two of my own as well and what it means for the deal making sector in the second half of the show. Rather than answering questions from the audience, Jonathan will be reflecting on 2025 from the deal's perspective and looking into his crystal ball and making some predictions for 2026. I do need to apologize though.
Unfortunately the OBR have released this very funny podc. It is recorded Jonathan, a crazy day. How do you assess it?
[00:01:01] Speaker B: Well, I suppose thinking about it, it's not as bad from a deal making point of view as a lot of people were worried about.
People had been worried about possible increases in CGT rates, people had been worried about things that might happen to non doms, things like that.
So quite a lot of the things that people had been worrying about haven't happened.
Having said that, I mean there are some quite important changes here, aren't there? So things, you know, the cost of running a business seems to have increased, so I think we are going to see some businesses will be less profitable after today than they were before.
But it does seem that there's been quite a lot of extra taxes going to be paid. It's just been done in a more surreptitious way than directly increasing the tax rates.
[00:01:55] Speaker A: Obviously labour would tip to increase income tax and then they did a U turn on that after it would have broken their manifesto pledge as well. I was listening to Rachel Reeves give it and it was described as the third largest tax raising budget since 2010. It's a tax and spend budget. You know, taxes have gone up, spending has gone up, the cost of welfare has gone up as well. What would be interesting is whether or not the death by a thousand cuts type tax rises will be enough to push those company owners who are thinking about selling over the edge into selling. So what I'm going to do is I'm going to pick your brains really about the budget. But I want to take you back a little bit before before today's budget. I think you've done Seven deals in the last few weeks, which always makes me believe that when there's a big fiscal announcement coming, companies and company owners want to sell their business. So you probably saw a bit of a bounce on that. But what did the entrepreneurs say to you?
[00:02:47] Speaker B: So there have been a number of deals completed across the market in the last few where people had been rushing to get deals done ahead of the budget because they were worried about what might happen.
Everyone knew that there is a problem in the public finances and people were worried that the CGT rates might go up. So people have been rushing to get deals done. I know that our teams were working late last night to get a couple of things over the line last night.
And so I think there'll be quite a lot of people will now be breathing a sigh of relief. I think the question is, I think they talked about headroom above the stability rules of about 21.7 billion pounds, whether that's enough to get them through the next year or so or are we going to find that the next budget we've got the same questions about whether there needs to be more tax.
So I don't think necessarily that business will be thinking, okay, now we can breathe a sigh of relief and just get on with it.
Minimum wages increase, so certain sectors are going to be definitely going to be affected.
But yeah, so a lot of deals people have been rushing to get deals done and have done. I don't think it was quite as many people as in previous years.
I'm still reasonably optimistic about the deals market over the next 12 months. I think think the fact that CGT's not gone up, I think that is a relief.
[00:04:18] Speaker A: Yeah. If you're a milkshake drinking, EV driving entrepreneur living in a five million pound house, you will feel the pain. And we share your pain. Not that I drink milkshake, drive an EV car or live in a 5 million pound mansion.
A lot of talk before the budget of entrepreneurs decamping to Dubai, an area that you know well, having worked there for a short period of time as well.
Do we think that's likely to happen?
[00:04:43] Speaker B: So again, there were stories in the news about people leaving the country worrying that there may be an exit charge levied on wealth from today.
There's some quite high profile cases in the last few days.
I know that a lot of our clients over the last year or so have been moving abroad. So it's not, it's not been made up, it's definitely been happening. It's a definite trend and it's definitely cost the country, some tax the people, wealth creators leaving is just not a great thing.
I don't think there's anything that's come out of today that means that people will suddenly be wanting to leave. But I think it's a general mood is whether the reality is that the government are creating an environment for growth and is the British business can it galvanize itself and start to drive for growth?
Small number of new steps taken to encourage entrepreneurship at the smaller end and so that might have a small impact. But I don't think this budget has really changed that environment that much.
[00:06:01] Speaker A: There was a couple of things stood out for me. This has been described as the most leaked budget ever. In fact, the Deputy speaker stood up to complain about the amount of leaks before Rachel Reeves stood up and the irony that the entire budget had been effectively released by the OBI before Rachel Reeves actually uttered a word, sort of, you know, was the icing the cherry on the cake, so to speak. One thing that stood out for me from a deal making perspective was that the Chancellor's launched a three year stamp duty holiday for new debut companies on the London Stock Exchange to attract listed companies. Now the backstory to that is a lot of companies have exited the London Stock Exchange and are increasingly looking over the Atlantic to look to New York as well. I think revolut are one.
The hope is that this move will get more companies to IPO in the UK on the London Stock Exchange. Do you think that's a good thing?
[00:06:54] Speaker B: Well, I think anything that encourages more access to the UK market has got to be a positive.
I mean I've been waiting for a while for the IPO market to become more active again. It's been quiet for a year or two, maybe longer.
We have a team starting on Monday actually who specifically focus on public company advisory.
And so we've been putting our money where our mouth is in that regard.
I think it's anything that helps attract listings into London has got to be viewed as a positive. I think the wider environment, the wider regulatory environment and the economy, growth in the economy, the investor community are probably bigger issues though.
[00:07:45] Speaker A: One other thing that caught my eye before I ask you what caught your attention is there was a widening of the eligibility requirements for programs including seis and Venture Capital Trust investment to broaden access to investment incentives, especially beyond the startup stage as well. So one of the things I often hear from founders is how difficult it is to raise investment, especially beyond that startup phase, that gap between startup to scale up as well. Now obviously the proof of the pudding will be in the eating. But is that something. And obviously the budget's just happened, but your immediate reaction to that.
[00:08:23] Speaker B: So it's notoriously difficult to raise funding for early stage businesses and so tax incentives to do that. The EIS scheme is a good incentive and if that's being extended, then that will be a positive. It's notoriously difficult and there are a whole range of different sources of funding.
But the reality is it's hard sometimes to spot, to sift out the high quality investment opportunities for investors from the plethora of other investments. And so anything that helps that community is good. But early stage fundraising is a tough gig.
[00:09:08] Speaker A: What caught your attention, Jonathan?
[00:09:13] Speaker B: So obviously the sheer amount of tax increases that have been produced by the budget is startling. Obviously, the increased tax rate on dividends up to 120,000, the 2% increase in tax rates on investment income and, well, they're going to have a notable impact on people, how people think about extracting money.
I also noticed that they're going to dilute the tax benefits of employee ownership trusts.
I think the tax relief now is going to be half what it was for a lot of people who have done EOTs and wish they hadn't now.
And so I think they are now much less attractive than they were.
And like I say, I don't think we'll see anywhere near as many of those going forward.
But like I say, the most important thing for me is that the capital gains tax rates haven't gone up.
[00:10:22] Speaker A: I'm just looking at a story here. The Chancellor has confirmed that dividend tax rates will increase by 2 percentage points from April 2026.
So a lot of people, a lot of entrepreneurs pay themselves dividends, don't they?
That's going to get more expensive in terms of tax.
Yeah, yeah, yeah. In terms of.
[00:10:39] Speaker B: I think that's notable.
[00:10:40] Speaker A: Yeah. So in terms of, you know, if I said to you, you know, are people going to be inclined to set their own business up?
This makes it slightly harder.
[00:10:51] Speaker B: I don't think that this budget has made. It has done much that will make people think, I'm not going to start up a business. You know, the, the capital taxes had gone up significantly, that could have had an impact.
I think that the environment for fundraising is still strong.
There's one or two other things. There was a lot of people who'd been talking about, will national insurance be imposed on professional partnerships? I've not seen that that's happened.
So a number of the things that people were worried about haven't happened.
But overall the country is going to pay a lot more tax and I suppose the amount of public spending has increased, so some people will be pleased to see the limit on child allowance being lifted.
Personally, I had wondered whether over the next few years that it's probably going to be necessary to look at spending on, I don't know, disability allowances. There's a lot of spending on benefits.
I heard some discussion about whether or not the public pensions can continue to be paid at the rate they are. I'm not surprised that this budget hasn't changed those things, but they are still there and at some point will need to be addressed.
[00:12:18] Speaker A: I think political analysts are a bit like football pundits who predict the result of a match and everyone's forgotten what they predicted when the result comes out. But if you look at some of the predictions before the budget, the Times their property tax for homes worth more than 2 million. Yep, definitely. If you've got a big house, you're going to be taxed more. You know, the I newspaper predicted Rachel Reeves plan to target universities with a tax on international student fees. It's fascinating how many things weren't mentioned such as that. Such as AI was barely mentioned. I mean, I work as a tech journalist. AI is going to change the world and it's going to change this landscape as well. You mentioned LLP's. A lot of talk about the gambling industry was going to be hit and they have probably not quite as hard as some people perhaps thought they they were. I know you love your bingo, so I know bingo is. It's a good day for bingo players all over the world. And City Am reported four in ten UK based entrepreneurs would weigh up whether to leave the uk, depending on Rachel Reeves speech to contain either a hike to capital gains tax or a shake up of inheritance tax gifting rules.
[00:13:20] Speaker B: Nothing's changed on the inheritance tax rules. I know that in London today the farmers have been demonstrating, I don't think they've got any succour from that.
And where people have been worried about inheritance tax rules or tax on global assets, nothing changed. So those people will still be worried and there could still be people leaving the country and that fearful of those things because nothing's changed there.
[00:13:49] Speaker A: So it's not a. Probably not as bad as some people thought, which is typical, you know, politicians trying to, you know, prepare us for the worst doomsday scenario. Would that be your take?
[00:14:00] Speaker B: Yeah, like I say, as a corporate financier, as somebody involved in the sale of businesses, I personally breathed a sigh of relief today.
One interesting thing that I've heard mentioned is that there's been a consultation issue that might lead to the reduction of restrictive covenants for employees, which given my own experience recently, over the last year or so, year or two, I think that, that, that's very interesting to observe.
[00:14:32] Speaker A: The one that caught my attention was salary sacrifice as well.
There's so much said and you try and listen, you try and listen to it again. And actually one thing I will say, I thought the behavior, listened to it on the radio of some of the politicians wasn't particularly edifying at all. It was shouting, it was shouting over politicians. Yeah, I know you get that. But it felt it sounded like a classroom at times. So time for a quick break. When we come back, Jonathan's going to reflect on 2025 and he's going to take a little look into his crystal ball into 2026.
Welcome back to the second half of the Dealmaker Uncut podcast. We've just given our take and Jonathan's take on the bud. We've done it very much on the hoof in terms of it's only just happened as well. But we wanted to try and do this podcast because we know we've got a growing audience. Jonathan, I'm going to talk to you a bit about 2025. It's been a big year for you. You've been all over the place. What trends have you seen this year?
[00:15:48] Speaker B: So I've mentioned this a few times before that if you are a business owner and you own a business that is a tech enabled business in almost any sector, a business that is showing growth, that is robust, with a strong management team and a good business plan, you can raise private equity money and you can run a sale process and it will be well attended. There's lots of private equity money looking for a home and there are still trade buyers both in the UK and certainly overseas to buy businesses. So you can still run, you can still sell businesses for great multiples for other businesses in older style industries, it's been tougher. And I think that's in those sectors is where the M and A market has been tougher. Undoubtedly in 2023, the deal volumes fell very dramatically. And while everybody's been expecting increases in multiples in the deal volumes completing, it's never quite met expectations.
And this year our observation is, I mean, obviously we've been a business that has been growing in momentum all year. So our deal completions have been growing every month. And I think we're at the point now We've completed seven deals in the last four or five weeks. I think we'll be completing on average a deal a week and growing. So. But that's our business. I think the market in general has been flatter than that.
But I still believe that there are vendors who want to sell their businesses who've been waiting and I do expect to see that deal volumes will increase over the next year.
There's been a bit of a correction in vendors price expectations. I think people finally accepted in those older style industries they need to be a bit more realistic on value. So I think that will lead to more deals.
But like I say, there's a lot of very high quality businesses being sold at very high prices at the moment as well.
[00:17:57] Speaker A: It's hard to believe Donald Trump's inauguration for his second term was only in January this year. It feels like he's been around for ages again. His tariffs had a big effect on the global economy at the time. Is the Donald Trump factor still a factor?
[00:18:10] Speaker B: Yeah, I think the macro factors, the tariffs obviously in certain sectors have caused all sorts of problems. It's more the uncertainty has been the issue.
But you know, sectors that are being tariffed, you know, they might have to change their views of export sales.
Businesses that are selling to the us, you know, are definitely going to be reassessing the future.
But you know, the general state of the UK public finances have created uncertainty in industry and the uncertainty about what the Chancellor would do.
There's political uncertainty around, which is never positive for businesses.
And so it's been a difficult environment.
I think going forward. A lot of businesses really need to start to focus on, on how to plan in an environment of uncertainty because it's going to carry on.
[00:19:14] Speaker A: I've just come back from the Web Summit in Lisbon, which is the biggest tech conference in Europe. 71,000 delegates there. Phenomenal really actually, but too busy for me, if I'm being honest.
All about AI. And you've only got to look at the valuations of some of Europe's tech businesses. So there's a company called Lovable, it's just been valued at 6.3 billion. Fuse Energy is valued at $5 billion. Vinted is, I'm sure you're a big fan of Vintage reported valued at 8 billion euros. And what was interesting having been there, is that double edged sword. So what you're seeing is you're seeing these absolutely hyper growth valuations of tech companies. I mean, Lovable is only a couple of years old and it's doing 200 million IRR already.
But I think the biggest threat to AI companies is AI because other people are coming up on the rails at breaknet speed and doing what these other established AI companies are doing.
With that in mind, what do you think we can expect in 2026?
[00:20:09] Speaker B: So you mention AI, and particularly in the US there's so many new technology businesses developing around the whole area of AI.
The share prices have been really, really high. People have been talking about a bubble over there and when it will be corrected.
And I was over in New York a few weeks ago and there was a couple of my clients here that I met over there who were talking to U.S. private equity houses and U.S. trade buyers because they thought that they could get an extra turn or two if they looked at selling to buyers over there. Just because the pricing over there has been so much higher, maybe a correction over there is due.
Like I say, for 2026.
I think that the number of deals in the market will increase. I think the amount of private equity money available that needs to be deployed will drive more deals. I think the vendors are being a bit more realistic in sectors where that's necessary. But we are just seeing more and more technology businesses coming through where that are really attractive propositions as well. We're expecting to see a bit more activity in the public markets as well, and so that would be a welcome change for next year.
[00:21:40] Speaker A: I don't know if our listeners and viewers will be able to hear in the background a helicopter flying overhead. We're in London now. I can only assume, Jonathan, that that's your private helicopter about to land on the roof to whisk you away somewhere exotic. That's all for this special episode of the Dealmaker Uncut Podcast. Really enjoyed doing it. Thank you very much, as always to Alvarez and Marcel. Been a bit different to the normal ones.
[00:22:00] Speaker B: Yeah, no, I've enjoyed it, Chris.
[00:22:02] Speaker A: Okay. And don't forget to subscribe to the podcast, tell your friends and family and follow us on social media. As always, my name is Chris McGuire, but the star of the show is Jonathan Boyers.
[00:22:10] Speaker B: Thanks, Chris.
Sam.
