Corporate Finance in Atlantic Canada

Commentary on corporate finance issues for small- & mid-market private companies in Atlantic Canada

Posts Tagged ‘baby boomer demographics

Selling your small business during the pandemic

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At the link above is an interesting CNBC op-ed about selling your small business during the coronavirus pandemic.  While the statistics quoted are US, there are strong similarities with the Canadian small business market.  For example, while the average small business owner is 60 years, we believe that is higher in Atlantic Canada due to the demographics in our region (see my earlier posts about the last census).

“Many business owners who want to cash out and retire are worried they won’t be able to do that for years because of Covid-19. Nothing could be further from the truth. Investors with capital are always looking for opportunity, no matter what is happening in the market.”

There are certainly plenty of buyers in Atlantic, and they have access to debt & equity capital.  While many paused at the outset, we’ve seen transactions close in Atlantic Canada during this pandemic.  We also agree with the article that there will be many business owners who will want to sell once the economy re-opens.  There is some expectation of slightly lower valuations (due to the uncertainty of the economy), but we’ve seen some evidence that any declines will not approach that of the public market declines in March (where most industry multiples were down at least 30%, although significantly improved since then).

Some good points in this article about exit planning steps to take coming out of the pandemic:

  1. Understand your goals (such as desire for retirement) and what they mean for your business.
  2. Clean up your financials (identify normalizing adjustments, etc).
  3. Mitigate the risk factors that could prevent a sale (such as resolving outstanding litigation that could mean a buyer won’t acquire shares).
  4. “Battle-test” your operations (prove that your staff and management team can run the business without you there every day — this will improve the value of your small business).

One of the themes of this blog — there are plenty of buyers and capital to fund them — still holds true as we come out of this lockdown due to the covid-19 pandemic.

Written by Dan Jennings

June 2, 2020 at 10:22 am

Business succession in NL

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On a recent VOCM radio show in NL (hosted by BDO partner Nancy Snedden), tax colleague Greg London and I talk in-depth about the challenges of business succession in NL.  We covered a wide variety of topics, such as demographics, taxes, the buyer landscape and more.

Written by Dan Jennings

October 26, 2018 at 1:34 pm

Is now a good time to sell your business?

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As M&A advisors, we get asked this question a lot … “is now a good time to sell my business?”

The answer is yes … for example, the last two businesses we’ve sold in NS yielded an average of 9 offers each (signs of a very strong M&A market!).

But the timing still has to work for you and your family.  If you’re 50 years of age selling a small business, the market will typically not yield a high enough price to warrant you giving up the stream of profits from the business (unless you have other income-generating things you want to do after selling).  Of course, that assumes you don’t have health or other issues that could prevent you from operating the business for the next 10 years.

If, however, you are closer to retirement age and want to crystallize the value in your business, the market is very strong right now.  For quality small and mid-market businesses, we estimate there are at least 10 buyers for every seller.  That means a general rise in pricing, but also an improvement in terms (such as lower amounts of vendor financing).

Written by Dan Jennings

July 20, 2015 at 3:54 pm

The New Retirement – Starting a Small Business?

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Interesting article on a survey of baby boomers by TD Bank.

“54 percent of boomers (those born between 1946 and 1964) have started or considered starting a small business prior to retirement … The top reasons boomers consider starting their own business before retiring were:

  • being their own boss (58%),
  • having the opportunity to make more money (53%),
  • and having a sense of personal achievement or pride (50%).”

If you are one of those boomers considering starting a small business, you might want to consider buying an existing one instead.  Check out our website for plenty of information on the entire process of buying a business. 

Written by Dan Jennings

August 22, 2013 at 4:50 pm

US baby boomers are selling their small businesses

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According to, the number of sales of US small businesses were up 56% in Q1 of 2013 (compared to Q1 of 2012).  One quote:

“We started getting a lot of activity with sellers who said, ‘I don’t want to go through another downturn or tough time.  I want to see if I could sell my business.'”

According to Pepperdine University, baby boomer retirement was the number one reason for small business sales in this period.

We haven’t seen this kind of huge spike in Atlantic Canada, but the number of transactions is definitely increasing, as sellers who paused over the recession impacts on their businesses have now come back to the market.

Written by Dan Jennings

June 7, 2013 at 9:54 am

NY Times: How the Sale of a Business Can Go Terribly Wrong

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“The moral … be sure to hire advisers who have experience and are competent at what they do.  This is especially true when it comes to selling a business.  You can spend years building a business, but you generally get only one shot at selling it.” 

Interesting NY Times article on what can go wrong with the sale of a business.  From a US perspective, but still relevant in our market.

Written by Dan Jennings

January 31, 2013 at 10:01 am

Is now the “perfect” time to sell your business? It depends …

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This article in the Globe and Mail lists a number of reasons why this may be the “perfect” time to sell your private business, such as not having to ‘fight’ through another possible recession, being wary of the tax implications of selling and beating the ‘rush’ of baby boomer sellers who will be coming to market in the coming years.

While I don’t disagree with any of these reasons, and I also agree that the timing of your decision to sell is critical, I personally believe there are so many issues to consider that now may not be the ‘perfect’ time to sell for many entrepreneurs.  For example, the personal decision of what the entrepreneur will do with his/her free time after the sale can be terribly relevant to the sell decision … may not be relevant to a buyer’s pricing or purchasing decision, but it is very important to many sellers.  Also, the consolidating nature of your industry (or not) can mean the difference between a ‘fair’ price from financial buyers and a ‘super’ price from strategic buyers, so timing the decision to sell in your industry can trump all other factors (for some businesses).

There is one reality in today’s marketplace that is an important part of the decision to sell, and that is the fact there are many more potential buyers than sellers for quality, small and mid-market businesses in the Maritimes (in some cases, three times as many buyers).  ‘Quality’ can mean different things in different situations, but the overriding criteria are typically having a profitable track record and the ability to transition the existing owner/manager to a new buyer.  Since much of the art of selling a business is matching supply with demand, this over-balance of buy-side demand must be considered in any decision to sell.

As with all complex decisions, the answer as to if this is the ‘perfect’ time to sell is mult-faceted and often begins with “it depends” …

Written by Dan Jennings

January 31, 2013 at 9:37 am

New CFIB succession survey … and my thoughts

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The 2008-2009 recession prompted some baby boomer entrepreneurs to delay their retirement plans and stay in business longer than they had anticipated.  That’s according to a new report, Passing on the Business to the Next Generation based on survey data from the Canadian Federation of Independent Business (CFIB).  48% of SME business owners said they intend to exit the business in the next 5 years.

Now, surveys like this are not new … I remember seeing one in the early 90s basically saying the same things (no formal succession plan in place, need to sell the business to finance retirement in the next 5-10 years, etc).  However, this new CFIB one was done after the economic ‘dip’ in 2008-09, so it is relevant to consider.

In my own experience, the recent recession did cause a pause in entrepreneurial succession plans, but not only for the reasons identified in the survey.  The volatility in the public stock markets and concerns as to where to invest the sale proceeds have been real issues delaying some succession, in my experience.  Some entrepreneurs understand the returns they can achieve in their business, but are concerned when the stock markets overall in the last decade have failed to achieve even modest returns.

In addition, one of the challenges for small business owners is value/price — if the business is in an industry where there is no large strategic buyer consolidating and paying premium prices, many small businesses are valued by the local marketplace at 2-3 times cash flow, and this can be surprising to many entrepreneurs.  This surprise can mean some entrepreneurs believe they cannot ‘afford’ to sell yet.

Written by Dan Jennings

November 28, 2012 at 11:22 am

Pent-up Demand for Deals

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Interesting blog post from Chris Mercer (one of the US valuation gurus) on the ‘M&A tsunami’ still to come.  He lists various reasons — from the availability of capital to baby boomer demographics — some of which apply to Atlantic Canada as well.  In particular, the amount of capital that is sitting on the sidelines is huge in our local marketplace.  Month after month, we are approached by acquirers and lenders, who have both debt/equity capital available for M&A but can’t find enough deals to utilize all this capital.  Private equity funds especially have capital they need to place in order to generate the returns promised to their investors and pay the managers bonuses (and holding cash in money market funds doesn’t cut it).

The question, of course, is if/when this pent-up demand will cause prices for small and local business M&A to rise?  I believe that eventually buyers and capital providers will be willing to accept lower returns and this will drive multiples and prices higher.  We saw the same thing happen in real estate over the last twenty years — the demand for real estate has driven cap rates to unheard-of lows, meaning that real estate owners/investors have come to accept relatively lower rates of return (higher prices) in exchange for an asset class they believe is relatively lower risk.  Many investors are also skeptical of the equity stock markets and the low rates of return expected there in the coming years.

In addition, Mercer makes a valid point below, i.e. the sellers largely (but not all) ‘paused’ in 2008-2010, but the baby boomers still eventually need to sell, even if they do expect to work longer past an expected retirement age.

“Baby Boomer Transition Bubble just got kicked down the road?
In essence, the bubble is still there – it just got kicked down the road.  Now, the backlog of sellers is bigger and the situation may become more urgent.  It is true that most business owners have adjusted their retirement expectations and it has been estimated that retirement ages have been pushed out about 3 years on average.  Since very few businesses sold during the 2008-2011 timeframe, there is an enormous backlog of business owners who would sell given the right circumstances.”

Written by Dan Jennings

October 5, 2012 at 3:57 pm

Posted in CF Musings

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