A growing divorce rate is having a significant impact on the values of businesses, according to Azets.
The potential for marital break-ups needs to be factored into the planning process for selling or passing on a business, the accountancy and business advice firm added.
During the past decade the annual divorce rate in Scotland has averaged around 10,000.
But this year it is widely expected to reach 12,000 as the cost of living, wider economic challenges and the impact of the Covid pandemic years takes their toll on relationships.
Anyone thinking of marketing their business for sale should ensure that divorce and relationship risks are fully addressed and assessed.”
Azets partner Murdoch MacLennan said: “The values of family businesses and SMEs (small and medium-sized enterprises) will be seriously affected by the trend due to the close personal relationships that usually exists between directors/family members immediate, or extended and key shareholders.
“The risk of relationship breakdown is often overlooked, but must be factored into contingency planning so the full value of a business can be protected.
“It is not just the sale price that needs protected – it is also jobs, values and business relationships.”
Mr MacLennan added: “Divorce and fractured personal relationships can seriously damage business valuations, market appeal and the sale value.
“Unfortunately, Scotland like the rest of the UK, will witness a significant number of divorces this coming year, many of which will involve entrepreneurs running family businesses and SMEs.
“The risk of further changes to taxes arising from the sale of a business will be encouraging owners to accelerate any sale.
“However, anyone thinking of marketing their business for sale should ensure that divorce and relationship risks are fully addressed and assessed. The risk is much reduced if it is out in the open.”
Areas that Azets will often focus on when discussing succession planning with business leaders include:
- How relationship breakdowns affects business and asset valuations
- Common objectives, age gaps, personalities and personal values
- Founders children becoming involved and falling out
- Investors running from failed relationships
- Personal vendettas driving rushed sales
“We would encourage business owners looking to protect their business, workforce and stakeholders to create a matrix of relationship risks so that divorce and conflict issues can be fully assessed,” Mr MacLennan said.
“Relationship breakdowns cause wealth destruction and risk to the underlying business.”
He added: “Scotland is set for a rising divorce rate but with open planning and communications the financial impact on business sustainability and or sale can be sensibly managed.”
