'The tectonic plates are shifting': Why Scotland’s mid-market is entering a decisive moment

Succession, overseas buyers and tax deadlines are quietly reshaping ownership across Scotland’s mid-sized companies.

Credit: MH

That is the view of Macdonald Henderson’s (MH) David Beveridge who says his firm is seeing first-hand a decisive shift in their ownership structures.

From his Glasgow city centre offices, the Managing Director and corporate lawyer is advising on a steady flow of deals involving owner-managed and family businesses across the country.

The MH client base sits squarely in the £5m to £100m range across sectors including industrial, engineering, services and specialist firms that form the backbone of Scotland’s private economy.

And he believes that base is entering a structural shift.

“The tectonic plates are shifting,” he says. “We are seeing (very quietly in most cases), a big shift in the ownership of Scottish mid-sized companies.”

David’s firm was built around this tier and when he acquired Macdonald Henderson in April 2009, (funding the deal personally during the 2009 financial crisis), he continued positioning it away from large corporates and public sector mandates.

“What we wanted to be was that go-to provider for entrepreneurial, scaling-up and family-owned businesses,” he says.

“That is the bedrock of the Scottish business world.

“We really like SME businesses that employ lots of people, trade really well, have identifiable assets and with growth potential.”

Since then, he says, the firm has grown to roughly four times its 2009 turnover and now employs around 30 staff across two Glasgow offices (City and West End).

Mid-market companies, he argues, have demonstrated resilience through disruption.

“A lot of businesses have been very, very careful with their money,” he says.

“They have been building significant cash reserves. They have been quietly trading on through political uncertainties, through Covid and through global energy shocks and other headwinds.”

Many founders of Scotland’s traditional businesses are entering the final stages of their working lives and have their wealth tied up in their firms.

The shocks of Covid and tax changes have forced many to consider how they can protect that wealth.

“Many clients are now coming through to the point where succession is really, really important,” David says.

“For corporate firms like us, that presents a million opportunities to be advising this really great blue-chip client base about what they do next.”

Buyers are increasingly international in make-up and in recent months the firm has advised on disposals to Nordic, US and European acquirers.

David describes Scottish mid-market firms as attractive assets as they are technically skilled, operationally disciplined and competitively priced relative to global peers.

“Usually, they provide very good value from an international buyer viewpoint,” he says.

Tax is accelerating the pace in which mid-market owners are making decisions.

“Every time we’re coming up to April, the starting gun’s going again,” David says.

“We are getting these deals piling through the door which have to be done by the 31st of March/start of the next tax year.

“Otherwise they could face paying more in Capital Gains Tax and for business owners that has a significant impact on their future plans.”

But David cautions founders against allowing tax alone to dictate strategy.

“We would always be pretty thoughtful about moving a business on solely for tax reasons (“the tax tail wagging the dog”) ,” he says.

“There’s so much more to it than that.

If this edition highlights the financial scale of Scotland’s mid-market, David highlights its structural vulnerabilities.

Too often, he says, companies reach sale or investment discussions with weak (legal) foundations.

“You build this great structure,” he says, “but it’s actually starting on some pretty wobbly bits underneath because you haven’t done your basics.”

Share allocations, commercial contracts, governance documentation and shareholder agreements can be neglected during high-growth phases.

“There is no buyer worth their salt that will not do proper due diligence,” he says.

“If companies haven’t respected all the things that we need to do in a compliant way, then they are going to be in trouble.”

Equity mistakes are another recurring issue.

“If an employer simply hands shares to an employee, the employee will most likely get taxed on the value of those shares,” he says.

“You’ve probably given a tax bill to an employee. The right thing to do (in many cases) is to give them options.”

David says that mid market firms should always have their focus on evolving their leadership teams, advice that he too has taken on board.

“There is a danger you become a little bit defensive and you say, well look, this is going great, why would I change it?” David said.

Last year Macdonald Henderson moved to an equity split, a shift he describes as liberating.

“I’m pleased that I’m no longer the sole equity player here and the MH management team has brought significant new energy and additional skills.”

His advice to founders is simple. Plan early, document properly and treat ownership decisions with the seriousness they deserve.

Five mid-market lessons from David Beveridge of Macdonald Henderson:

Succession is accelerating across Scotland’s mid-market

A significant cohort of founders are approaching transition points, forcing long-delayed decisions on ownership and control.

International buyers remain active

Strategic acquirers from Europe and the US continue to target profitable, well-run Scottish businesses with export capability and technical depth.

Tax deadlines are shaping deal flow.

Spring capital gains tax changes are repeatedly compressing timelines and pulling transactions forward.

Governance foundations matter

Strong revenues and loyal teams are undermined if share structures, contracts and compliance frameworks are not properly built.

Ownership decisions are decisive

Poorly structured partnerships and missing shareholders’ agreements destroy value quickly and are costly to unwind.

For Scotland’s mid-market, discipline, preparation and timing now matter as much as growth.

Why Scotland’s mid-market is attracting overseas buyers

David Beveridge believes Scotland’s mid-market companies are increasingly attractive to international acquirers, particularly in engineering, specialist services and climate-related sectors.

In recent quarters, his firm has advised on disposals to Nordic, US and French buyers. The pattern is consistent with profitable, owner-managed firms with technical depth and export capability being targeted by strategic acquirers looking to bolt on capability, access new markets or strengthen supply chains.

The shift is not new. The sales of Skyscanner and John Wood Group to overseas buyers have already prompted debate about long-term economic embeddedness.

The ‘command and control’ function for many Scottish-founded businesses has moved overseas following acquisition, raising questions about where strategic decisions and capital allocation ultimately sit.

David argues that international ownership does not automatically mean decline.

Many buyers, he suggests, are investing with a long-term horizon and retaining operational footprints in Scotland.

As this edition maps Scotland’s industrial clusters and ranks its leading mid-market firms, the structural question is clear.

Who will own the next generation of Scotland’s industrial backbone and how prepared are those businesses for that transition?