How to transfer a business without causing it damage

Cardiff University and corporate finance firm Gambit are joining forces to create a dedicated business succession planning unit.

 

The initiative follows Gambit successfully securing funding from the DTI's Knowledge Transfer Partnership scheme.

 

The joint venture will see Cardiff University working with Gambit in strengthening the firm's in-house research capability.

 

The two-year project's prime aim is to focus resources on the identification of businesses where succession planning is an issue and advise owner managed businesses on appropriate exit strategies.

Gambit is in the process of recruiting a researcher who will work towards a masters.

 

The Centre for Advanced Studies at Cardiff University is undertaking a detailed study into the management of growth businesses within Wales.

 

"This is the first KTP awarded to the School of City and Regional studies, one of the top research departments in its field in the UK", said Professor Dylan Jones Evans who will mentor the KTP project."

The project will devise methodology derived from various databases, sector reports and technology reviews to provide new knowledge in areas related to the organisational and financial development of growing firms.

 

Prof Jones-Evans said, "The university will be applying academic knowledge to add value to Gambit's succession planning expertise, and demonstrate that research can be disseminated effectively from the university to SMEs."

 

Prof Jones-Evans said this will create knowledge of specific interest to researchers in the small and medium-business field concentrating on growing firms, business support and succession planning."

Research estimates that a third of UK owner-managed businesses anticipated a change in ownership within the next five years.

 

However, research by Bibby Financial Services suggests many are not prepared for a transfer of ownership, with 56% of entrepreneurs in the UK not having any succession plans in place. Another study has estimated that in the EU as whole, some 30,000 SMEs, involving around 300,000 employees, close annually because of a lack of succession planning.

 

More worryingly, in the vast majority of cases, these businesses are neither uncompetitive nor failing concerns, but close because of the lack of knowledge of their owners in transferring the businesses successfully to either internal managers or other potential buyers.

 

Frank Holmes, senior partner with Cardiff-based Gambit, said, "As a result, many businesses are simply liquidated with the tangible assets realising a fraction of the value of the on-going business or the business is sold cheaply to a competitor that will strip assets and close the business.

 

"A lack of effective succession planning is the biggest growth barrier faced by many firms, especially those which are owner-managed businesses.

 

"A properly planned and executed succession plan can deliver significant benefits for the owners of a business in terms of maximisation of shareholder value through effective tax planning and a smoother transition of ownership which minimises disruption to the business."

 

He said there are also economic and social benefits in terms of keeping successful businesses in the locality and safeguarding jobs.

 

Mr Jones Evans added, "Succession planning is therefore a key issue for many growing and established businesses and developing a key internal competence in this area will enable Gambit to enhance its already strong delivery capability.

 

Mr Holmes added, "We have always believed in the power and importance of quality research for deal origination.

 

"The KTP initiative takes our capabilities to another level which will benefit the firm and, more importantly, its existing and prospective clients whilst providing quality research material for the university.

 

Mr Holmes said it was a "rarity" for a financial advisory firm to receiving funding from the DTI scheme.

"It usually goes to the manufacturing sector.

 

"However, we have demonstrated that our project will have economic benefits in the SME sector in Wales, as well as bolstering our profitability through enhanced deal flow."

 

Mr Holmes said he was keen to establish a family business unit at Cardiff University.

 

"We deal with a lot of family- run businesses and it is important that advisers understand the dynamics of the sector.

 

"Not many family-run businesses go to the next generation and only13% are handed down to the third," he said.

 

Other member firms of CFI include Plante Moran Corporate Finance in the US, Helbling in Germany and Switzerland, Tradeinveste in Portugal and CS Corporate advisers in Spain.

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