ByCandice Krieger, Candice Krieger
It is all change for capital-gains tax this weekend. From Sunday — under the Chancellor’s CGT reforms — businesses will be charged a flat rate of 18 per cent on any business gains, meaning that for many people, the rate on business assets will increase by up to 80 per cent. Bad news, you would think, for clients of Howard Leigh, the managing director of Cavendish Corporate Finance, whose job is to help people sell their businesses.
But Mr Leigh, an active Tory and senior treasurer of the Conservative Party, remains surprisingly upbeat. “Eighteen per cent is not so bad. It is a lot better than 40 per cent, which is the alternative,” he tells JC Business, adding: “It doesn’t seem fair that someone who spends a lifetime setting up a business pays the same as a trader. This is Alistair Darling’s pathetic attempt to address this, but it will be a bureaucratic nightmare. He [Darling] messed it up.”
Yet Mr Leigh, who turned 49 this week, is confident that it will be a case of business as usual following the CGT reform. “Everyone has been rushing to get deals though before the deadline. But there will still be deals happening from here on in.”
Mr Leigh established Cavendish Corporate Finance in 1988, together with Hugo Haddon-Grant. They aim to sell 30 businesses a year, and in some years sell over £1bn-worth of companies. In 2005 he sold Avent, the baby-care range owned by Edward and Celia Atkin, to Charterhouse for £300m.
Things could have been a lot different for Mr Leigh, who by his own admission took a huge risk when leaving accountancy firm Deloitte Haskins & Sells to set up Cavendish Corporate Finance — thought to be the only company in Europe that solely advises vendors of business. “We started with a completely clean piece of paper,” he recalls. “We both agreed not to draw a salary for a year. We did not eat for a year.”
The business had a good couple of years, but the 1991 recession made things difficult. Cavendish was saved by two landmark deals — the sale of the David Morris International jewellery business to Footwork International Corporation, and of shirt retailer New & Lingwood to Rosterhold. Cavendish has since kept about nine months of overheads in the bank.
“You can’t be an entrepreneur unless you take risks and put your own capital into something,” he says. “And that’s why entrepreneurs relate to other entrepreneurs, and people who are in a large corporation or are salaried have a different mindset.”
Since its inception, Cavendish has completed around 400 transactions. The average sale price is between £20m and £50m, of which Cavendish takes a negotiable percentage. Though when Mr Leigh sold ailing fashion chain Etam to Sir Philip Green’s Arcadia Group for £1, he admits the fee was not a percentage.
Mr Leigh operates out of Portland Place in Central London — adjacent to the office of private-equity chief and leading Labour donor Sir Ronald Cohen, which he acknowledges is somewhat ironic considering his own Tory connections.
He first took an interest in politics during his time at Clifton College, Bristol. “I had an extraordinary house-master, Ernest Polack. He was a well-known socialist and, as a result, nearly all the boys at Clifton became Conservative.”
He began canvassing for the party at Southampton University, ahead of Margaret Thatcher’s reign. Today, he devotes half a day a week to politics. The rest of the time is spent on business.
Are there still deals to be done despite the current market? “There is no doubt that there is constant opportunity in the UK,” he says. The key, he adds, is spotting the opportunity at the right time. “There are a number of consumer-oriented businesses that will be feeling the wind [in the downturn] and looking for an exit. There will be a lot of deals. You have to move quickly.”
He acknowledges that larger deals have suffered in the current climate, but says there is still money available in the mid-market — for transactions up to around £100m. “There is also a lot of interest from European countries as the euro strengthens,” he says.
Ten years ago, Cavendish joined international alliance M&A International to enhance links with overseas buyers. “If you have a £10m business, Goldman Sachs won’t know where to find an overseas buyer, but we do.” He acknowledges there is a lot of interest from manufacturers in China, India, and the Far East looking to buy UK distributors and brands.
Knowing when to sell is largely gut instinct, says Mr Leigh. “Most entrepreneurs have a feeling in their bones and sense when a business is approaching its peak.” How to ensure the best possible return from the exit? “You need to create capital by building a brand. You want to establish a business in a niche of a market or creating a pool of talent that can’t easily be assembled.”
Although from an entrepreneurial family — his late father was in property, and his grandfather, and then mother, ran the family furniture business — Mr Leigh left university not knowing what to do. He got a job at merchant bank Singer & Friedlander, and, as he puts it, has been lucky ever since.
He went on to join Deloitte Haskins & Sells and qualified as a chartered accountant, setting up their mergers-and-acquisitions operation. But recognising the potential of a business that dealt with only the sell-side of business exits, he left to set up on his own. He admits this strategy has limitations — there is no repeat income; every deal is a one-off.
Mr Leigh was offered premises on Cavendish Square and subsequently decided to name the firm Cavendish Corporate Finance — a name which triggered almost immediate credibility. “When I told the partners I was leaving to join Cavendish Corporate Finance, they said: ‘Oh yes, that’s a very fine firm’. It didn’t even exist. We were in the process of registering it.”
The name has also attracted attention from further a field. Mr Leigh once received a letter from a lady in Cavendish, Suffolk, asking him to donate money to the local church appeal fund.
A trustee of Jerusalem Foundation, he chairs the Jewish Care business-breakfast committee. He is chairman of Westminster Synagogue, Knightsbridge. He has been a senior treasurer of the Conservative Party since 2000. He is married with two children.