Capital gains tax angst driving M&A opportunities, says AIM-listed tech provider

AIM-listed vendor says potential tax hike a 'significant factor' in increased number of enquiries

AIM-listed Restore has been increasingly approached by companies looking to sell as a result of the "uncertainty" around capital gains tax.

The UK-based document management and IT asset disposition (ITAD) firm reported in a trading update that there are "significant" acquisition opportunities out there, and that concern about a purported rise in capital gains tax was an "important factor" in the increased enquiries it is fielding from would-be sellers.

Last month it was reported that Chancellor of the Exchequer Rishi Sunak was considering reforming the levy so that it would be paid at the same rate as income tax.

"There are significant acquisition opportunities across all the markets we serve, and the level of inbound enquiries has increased, particularly with businesses we have known for some years," Restore stated in the update.

"There are many factors driving this increased activity, but one important factor is the level of uncertainty in the market around potential changes in capital gains tax over the medium term.

"Overall, we are seeing improved realism in the market around prices for various businesses and we remain very disciplined in choosing the right businesses that drive the long-term strategy and strong financial returns."

Restore has made over 30 acquisitions in the past decade, according to its website.

The update - covering the nine-month period ending 30 September 2020 - reported that Restore's revenues have seen consistent improvement, with its Q3 turnover up 16 per cent against Q2, while profit in the third quarter rose 50 per cent compared to its second quarter.

"I am delighted with the strong trading across all our markets as we deliver critical services to our customers," stated CEO Charles Bligh.

"We focused on making decisions early in the pandemic that ensured we continued to deliver for customers safely and ensured we could bounce back strongly. These decisions are starting to deliver, and we are well placed to deliver increased profits in the second half of the year."