UK businesses are facing what has been described as a succession crisis as newly disclosed figures show that 674,000 company directors have reached retirement age.
And these don’t merely comprise 67-year-olds as there are 109,000 aged over 80 and 12,000 still active beyond their 90th birthday.
The crisis implications, says Charles Incledon, Client Director at financial planning experts Bowmore, come with the fact that more entrepreneurs are unable to sell their business to new owners and retire.
Due to high interest rates pushing up the cost of debt, the past two years have seen the number of M&A deals fall sharply. This has left some entrepreneurs facing a wait of what could years until they are able to sell.
The worst-case scenario for them is that they will be unable to find a buyer for their companies at all and will instead have to wind them up. This leaves them dealing with a much lower-income retirement than they planned for.
Working past retirement age can be a very fulfilling thing to do for some – so long as it’s done by choice. For those who are forced to do so because of their financial circumstances, it’s often stressful and demoralising
Incledon says buiding a retirement strategy around selling a business “is a very high-risk approach. If it doesn’t pan out as expected, you can easily find yourself working into your seventies – or even beyond.
“For someone who has enjoyed a good income as an entrepreneur, the step down in retirement lifestyle that can happen when you’re unable to sell your business can be a real shock. Every entrepreneur should have a much more diversified approach to funding their retirement.”
He adds: “Working past retirement age can be a very fulfilling thing to do for some – so long as it’s done by choice. For those who are forced to do so because of their financial circumstances, it’s often stressful and demoralising.”
A recent ONS report revealed a fluctuating trend in M&A activity throughout 2023, noting a dip in July and a further decline in August, with signs of numbers ony stabilising in September, driven by factors such as strategic adjustments, enhanced regulatory clarity, and external economic influences.
The business advisory firm, Trachet, noted that the PE market has displayed resilience amid the overall M&A landscape. And while larger buyouts have become less common, PE firms are expected to grow in confidence in 2024.
CEO Claire Trachet said it had been a difficult year but the private equity prospects “signals a positive outlook”.
She added: “Despite a shift away from larger buyouts, the PE market demonstrates strength, showcasing a divergence where high-quality assets face aggressive strategies, and others undergo extended processes with heightened due diligence. The increasing focus on international markets and a positive outlook for 2024, as indicated by record pipelines and a substantial number of assets prepared for sale, underlines the industry’s resilience.”
