One of the most important, yet often overlooked, questions business owners will face is ‘What happens when I step away from the business?’. Whether through retirement, relocation, or a change of pace, succession planning is essential for preserving your business’s legacy, value, and the livelihoods of those who helped build it.
At our recent event on “Futureproofing Your Business with Succession Planning”, Harri Lloyd-Davies, Partner at Bevan Buckland, highlights the key exit options available to owner-managed businesses in South Wales. If you're starting to think about your exit, here’s a practical breakdown to help you begin.
Why Succession Planning Matters
The harsh reality is that a significant percentage of businesses never sell. Many owners delay planning until it’s too late, and the result can be a rushed or unsatisfactory exit that fails to preserve the value they’ve built over the years. But it doesn’t have to be this way. With careful planning and early preparation, you can choose the right succession strategy tailored to your business’s needs.
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Closing the Business
While not often planned, some owners end up closing their businesses when no buyer emerges or when they run out of energy or appetite to continue. This can feel like the simplest route as it’s fast, avoids complex negotiations or legal processes, and doesn’t require buyer engagement.
The downside? Closure typically means writing off years of built-up goodwill, forfeiting the value of your brand, and dealing with the logistical and financial burden of redundancies and asset disposals. There’s also a personal cost, as walking away can feel emotionally draining and leave a sour legacy. This option is sometimes necessary, but ideally, it should be a last resort.
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Management Buy-Out (MBO)
An increasingly popular route is a management buy-out, where your existing leadership team purchases the business from you. This can be structured gradually and provide a smoother and more culturally aligned transition because these are the people who know your company best. For owners who value continuity and want to see the business stay rooted in its values and team, this can be a rewarding option.
However, MBOs come with challenges. Your management team must be willing and financially able to take on ownership. There is also the risk of internal conflict or leadership gaps, and in many cases, they may require external financing or vendor support to structure the deal. Stepping back while remaining close to the business can blur lines and potentially create tension if leadership styles or visions divide. Nonetheless, when properly planned and supported, an MBO can provide peace of mind and maintain your legacy.
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External Trade Sale
For many owners, an external trade sale is the go-to strategy. This involves selling the business to another company, often a competitor or a strategic buyer in your sector. One of the main attractions of this route is the potential for a strong valuation, especially if the buyer sees synergies or market expansion opportunities. An external sale can also offer a relatively clean exit. Once the deal is complete, you may be able to step back entirely, enjoying the liquidity and freedom that comes with it.
However, this isn’t without risks. Cultural mismatches between your company and the buyer can lead to restructures and/or redundancies. Your team may feel uncertain during the transition, and buyers typically undertake thorough due diligence, which can be time-consuming and intrusive. Regardless of these negatives, with the proper preparation and representation, a trade sale can be an excellent way to unlock the full financial value of your business.
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Private Equity Sale
Selling to a private equity (PE) firm can be appealing for businesses looking to scale further or where the owner wants to remain involved post-sale, either by retaining partial ownership or management roles. PE investors bring capital, expertise, and often a well-structured plan to grow and eventually exit the business at a higher valuation.
However, life under PE ownership is not for everyone. These firms expect performance and returns, and may involve significant changes in governance and financial controls. Decision-making processes may change, and your business culture may evolve in a direction that doesn’t suit everyone.
Private equity sales are most effective when the business is already well-run, scalable, and has a solid second-tier management team. It’s an increasingly popular option, but one that requires careful cultural and strategic alignment.
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Employee Ownership Trust (EOT)
The Employee Ownership Trust model has gained significant popularity in Wales in recent years, especially among values-driven business owners who want to reward their staff and protect their company’s culture. Under this structure, the business is sold to a trust that holds the company on behalf of the employees.
One of the most attractive features of an EOT is the tax treatment. If structured correctly, the sale can be entirely tax-free for the owner (0% Capital Gains Tax), and employees can receive tax-free bonuses up to £3,600 per year. It also promotes long-term stability, deepens employee engagement, and avoids the disruption that can come with external ownership.
On the other hand, EOTs are not simple. Setting one up is complex and requires legal and governance restructuring, cultural alignment, and careful trustee selection. There may also be limited liquidity in the early stages, depending on how the transaction is financed. Nevertheless, for the right business, an EOT offers a meaningful way to exit while empowering your team and protecting your legacy.
Understanding Business Valuation
One of the most common questions we hear is: What is my business worth? The answer varies significantly depending on the business’s profitability and cash flow, sector trends, debt and working capital adjustments, and owner dependency and succession planning.
Common valuation methods include:
- EBITDA multiples: a common method, especially for MBOs and trade sales, based on earnings and profitability
- Asset-based valuations: used for asset-heavy businesses (e.g. property and equipment)
- Discounted cash flow (DCF): projecting future earnings and applying a risk-adjusted discount
- Market comparables: using benchmarks from similar business deals
However, valuation isn’t just about numbers. Buyers also need to assess risk. A business that is heavily dependent on its owner, with no succession plan, may be discounted. Strong recurring revenue, robust management, and clear growth potential will drive up value.
Tax Rules for Business Sales
Upcoming changes to Business Asset Disposal Relief (BADR) mean owners must act smartly and early. From April 2026, the capital gains tax rate on qualifying disposals will rise to 18%, 4% higher than today’s 14% rate. Even contracts signed before April 2025 but completed afterwards may be caught by anti-forestalling rules. In short, don’t delay. The right timing can have a substantial financial impact.
My Key Recommendations
- Start planning early: ideally, plan your business exit at least five years in advance
- Choose the right exit path: choose the right option that aligns with your business’s goals, team, and the market conditions
- Understand the different implications: consider tax, governance, and cultural implications, especially in light of the BADR changes
- Build your team: a strong internal leadership group can make all the difference
- Seek advice: engage advisors early for valuation and structuring
Succession planning isn’t just about leaving, it’s about protecting what you’ve built and ensuring its future. Whether it’s through a sale, a buy-out, or transitioning to employee ownership, your business deserves a thoughtful, strategic exit.
Bevan Buckland has worked with many business owners across South Wales to help them transition smoothly, successfully, and strategically. Whether you’re exploring your options or actively preparing for exit, we’re here to help. To get in touch, please call us at 01792 410100 or email mail@bevanbuckland.co.uk.
