Overcoming Business Challenges and Unlocking Opportunities Across the Midlands
Businesses today are navigating an increasingly complex and fast-changing landscape. More external factors than ever before are influencing trading performance, forcing companies to adapt and plan effectively. In a recent roundtable hosted by ThinCats, experts from corporate advisory firms, legal practices, and investment houses across the Midlands discussed the key challenges businesses face, strategies for overcoming them, and how to foster growth in a subdued economic environment.
Navigating Key Business Challenges
Over the last few years, business performance has been disrupted by an increasing number of external factors such as inflation, changes to domestic policy, geopolitical issues and other global market conditions.
Whilst businesses welcomed the stability of a new government in July last year, tax increases have significantly weakened business confidence and dampened the appetite to invest and hire. In fact, many are still anticipating the extent of impacts of new financial regulations set to take effect in April.
For certain businesses, especially in sectors like retail and hospitality, the additional employment costs they will face will be extremely difficult to navigate. Therefore, having a strong management team at the helm is more critical than ever before and being agile will separate firms that simply survive and ones that thrive.
Our Head of Borrower Services, Steve Ford commented that “Businesses we work with have been preparing since the budget was announced and are continuously adapting to new market conditions. The reality is that many businesses will look to offset financial pressures by passing additional costs on to consumers.”
Succession Planning Remains a Priority
Despite the ongoing market uncertainty and background noise, business owners continue to have one eye on the future. Succession planning remains a crucial component of any long-term business strategy, especially as for most owners it won’t ever feel like the "perfect" time to exit a business. Preparing early ensures smoother transitions and protects the value built over time.
However, even the most meticulously crafted succession plans cannot account for every eventuality. Recent changes to inheritance tax (IHT) have emerged as a significant concern for many business owners, particularly those running family-owned enterprises. These changes could make it less attractive to pass businesses down to the next generation, prompting some owners to explore alternative exit strategies. Finding the right approach to succession will be essential to preserving value and ensuring the business’s continued success.
Growth Strategies in a Low-Growth Environment
Creating and sustaining equity value has always been a central goal for business owners. However, in the current market environment, achieving organic growth has become increasingly difficult. Businesses are facing rising costs and cautious consumer spending, making it harder to drive growth through traditional means.
As a result, many leadership teams are looking at "buy and build" strategies to accelerate growth. Acquisitions have always been a tool for businesses looking to expand their market share, increase efficiencies, and strengthen their value proposition. Businesses that remain nimble and proactive are well-positioned to capitalize on emerging opportunities and high-quality companies with solid fundamentals are still in demand, even in a slow-growth environment.
Simon Dixon, Managing Director of Business Development at ThinCats, noted that businesses are becoming more strategic in their approach to growth. By combining organic growth with carefully selected acquisitions, companies can drive value creation while navigating market headwinds. Experienced advisors and strong management teams will play a pivotal role in executing these strategies effectively.
Protracted Processes but Green Shoots for Dealmaking
The dealmaking process has become notably slower, with completion timelines now stretching from the typical 3–6 months to 6–12 months. This reflects the broader uncertainty in the market and the increased caution among buyers and investors. A 'wait and see' approach from business leaders has also contributed to longer deal timelines and delayed decision-making."
Private equity (PE) firms, in particular, have become more cautious about bidding on businesses with high valuations. To mitigate risk, many PE firms now prefer structured earnout agreements, which tie part of the sale price to the future performance of the business. This shift reflects a more measured approach to risk management in an uncertain market environment.
Despite these challenges, there are positive signs of renewed activity and opportunity in certain sectors for example Business and Professional Services businesses are experiencing strong growth, with plenty of expansion opportunities given the sector’s fragmented nature.
Additionally, business owners are becoming more pragmatic about their valuation expectations. adjusting their aspirations to reflect current market realities, making transactions more achievable.
At ThinCats, we are committed to supporting businesses at every stage of their journey. Our expertise enables us to guide borrowers through tough times and help them unlock growth opportunities. Whatever the market conditions, one constant remains: quality advisers and investors are always a catalyst for growth. We will continue working together to support mid-sized businesses across the region.
