Corporate Finance in Atlantic Canada

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

Posts Tagged ‘succession

Canada’s Wave of Business Transition

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Readers of my blog (and LinkedIn posts and if you’ve attended one of my Bidding War sessions) know that while there have been plenty of small & medium-size business sales in recent years, there are many more to come.  It is a matter of demographics … 20% of Atlantic Canada’s population is already over the age of 65, and most of the children of those that are business owners don’t want the business (in my experience) … so, the reality is that many business owners are going to sell, even if some have been putting off the decision.

Our firm BDO recently partnered with FEI Canada for a survey of business owners about their succession plans.  While the findings may not be new to some of us, they are further corroboration of the above demographic reality.

  • 54% are expecting to sell within 2 years;
  • 19% are expecting to sell within 3-5 years;
  • 83% have less than $100mil in annual revenue.

https://www.feicanada.org/ajaxfilemanager/uploaded/SELLING_BUS_SURVEY_EN%20(002).pdf

Written by Dan Jennings

December 24, 2019 at 11:21 am

Cabco Communications sold

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https://www.thechronicleherald.ca/business/cabco-communications-sold-to-local-investors-307611/

The Chronicle Herald is reporting that Dartmouth, NS-based Cabco Communications Group has been sold to a group of local investors, led by Jim Mills (CEO of Halifax-based Office Interiors).  Cabco is a cabling & technology equipment sales, installation and service provider.

This is another example of the type of financial buyer I have spoken/written about many times.  In many sectors, private equity (or informal private equity in the form of a group of investors, in this case) has become a strong & credible alternative to ‘traditional’ industry/strategic acquirers.

Congratulations to majority owner Craig Meredith on his succession and exit!

Written by Dan Jennings

May 2, 2019 at 8:42 am

Business succession in NL

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https://soundcloud.com/vocm/sept-1st-greg-london-dan-jennings-of-bdo-valuing-your

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

CRA announces MBO

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http://thechronicleherald.ca/business/1596714-don-mills-reflects-on-40-years-with-cra-and-looming-retirement

The Chronicle Herald is reporting that Don Mills has sold Corporate Research Associates (CRA) to three members of his management team.   Halifax-based CRA is well known in the market research sector and has offices throughout Atlantic as well as Ottawa and Bermuda.

This is another example of a management buyout (MBO), where existing management acquire the business they work for.  Many entrepreneurs are surprised to know that MBOs are a viable succession/exit alternative and that’s because of the prevalence of capital in the marketplace to fund such acquisitions.  Every financial institution likes to fund MBOs and there are also plenty of private equity funds interested in backing management teams.

Written by Dan Jennings

September 13, 2018 at 8:36 am

5 Elements of a Successful Business Exit

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Below are five required elements for planning and executing a successful business exit.

  1. A plan based on the owners’ objectives.  Talk to your advisor about mapping out possible scenarios and options that align with your goals.  This doesn’t have to be in writing, but walk through the scenarios with an advisor.
  2. Work with an experienced team of advisors.  Accountants, M&A professionals, lawyers and investment advisors should be part of the exit planning process.
  3. A good understanding of business value.  Work with a valuator or M&A professional to understand how the market will value your business.  Do this in advance so that you can discuss any improvements that can boost the value.
  4. Hire a management team.  All other things being equal, a business with an existing management team is more valuable than one without.  Every buyer wants to know that the business can survive (and thrive) when the existing owner retires, and having an existing management team is the best way to prove this to a buyer.
  5. Time.  Allow for planning time in advance of when you want to retire/sell.  The process can take time, but especially if value improvements and/or tax strategies need to be implemented first.

According to some sources, anywhere from 67-90% of businesses listed for sale fail to get sold.  Developing an exit plan using the elements above can improve those odds.

Written by Dan Jennings

November 28, 2016 at 2:00 pm

Business Transition — Create the Choice

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https://www.businesstransitionsimplified.com/business-transition-create-the-choice/

Good article from BDO’s Grant Robinson on business transition.

My favourite part:

In my experience entrepreneurs should be looking at setting up their business so they have a choice to sell when they want and to whom they want. I am a believer in the philosophy that you will sell your business one day, either involuntarily or voluntarily and no matter what the trigger, you will either sell inside the business or family or to an outside private equity or strategic buyer. If you have prepared the business to be salable to the outside that enhances your ability to sell inside; if you have prepared the business to sell inside it enhances your ability to sell outside. Whatever your focus, the key is to prepare it for sale.

Written by Dan Jennings

May 19, 2015 at 3:02 pm

Family Business Paradox – Do you want fair or equal?

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http://www.bdo.ca/en/Library/Services/business-transition/pages/Family-Business-Paradox.aspx

Check out this BDO article on some of the challenges particularly unique to family businesses.  I like this paragraph on “fair versus equal” — some folks actually think this is how the “pot” should be divided!

If a father loves his children equally should he not treat them exactly the same in all matters? Does that mean everyone who works in the business is paid the same or that all children receive equal shares in the family business? If fair means equal then all family members working in the family business would be paid equally regardless of their skills and market value. If fair means equal then each child would inherit the same amount of wealth or shares of the business in their parents’ wills.

If fair is not necessarily equal then children who are given or left shares of the family business could end up receiving a much higher proportion of the family wealth than their siblings. If fair is not equal some children would receive a higher payout based on their employment value rather than on their gender or birth order.

Written by Dan Jennings

May 1, 2015 at 5:33 pm