• Mon. May 20th, 2024

Historic wave of business transfers: seize business opportunities

Growth and prosperity: here’s the
other side of the coin

The pandemic has been followed by phenomenal economic growth,
benefiting many businesses. Challenges have also multiplied, including
labour shortages, supply chain difficulties, the impact of
geopolitical conflicts, and successive interest rate hikes. “Many
entrepreneurs are now at the end of their rope and are thinking of
bringing forward their transfer to take a well-deserved break,”
observes Potvin.  

Ingenious solutions to address
financing challenges

A company’s valuation is often based on a multiple of its earnings.
However, years of record sales and high interest rates often result in
a daunting purchase price. “Structuring financing with several
stakeholders or opening up the shareholding earlier and gradually can
make the transfer more accessible to the next generation,”
suggests Potvin.  

These solutions also help tame the responsibilities involved in
taking over a mature business compared to a start-up.
“Surrounding yourself with people with complementary expertise,
including with the support of a group of investors, helps you feel
less alone and better prepared for the challenges,” adds the specialist. 

Finally, the financing plan must provide a business with the
flexibility to adapt to an increasingly competitive world, without
suffocating it with financial constraints. “We shouldn’t condemn
ourselves to excellence by being forced to achieve ambitious goals to
meet our financial commitments,” explains Geneviève Turbide
Potvin. There should be room for maneuverability to deal with
unforeseen events and ensure the long-term sustainability of the business.”

Protecting Quebec’s flagships and
preventing economic exodus

Between the economic slowdown, the aging of the population and the
decline in takeover intentions since the pandemic, the pool of
potential buyers is rather limited to respond to this major wave of
transfers. There is therefore a risk of witnessing an exodus of
Quebec’s flagships which, without local succession, could pass into
the hands of foreign companies. 

“In 15 years, Japan has lost about 20% of its
businesses due to inadequate planning in a similar
context,” 2 says Potvin.

Where is the ideal successor hiding?

Entrepreneurs are passionate people who have invested everything,
financially and personally, in the success of their business. It’s
therefore understandable that they prefer a successor who shares their
vision and values. Buyers, on the other hand, want to leave their mark
and guide their acquisition into a new era. “Having been founded
by and for entrepreneurs, National Bank has the network to support
each party in making their dreams come true,” says Potvin. 

For example, when a large manufacturer in Centre-du-Québec received
an offer from a U.S. private fund, the bank proposed an alternative
solution to keep the company here. “The key personnel who have
contributed to the company’s success have joined the shareholder base
thanks to flexible financing that leaves room for growth, while the
transferor has reaped the rewards of its years of effort,”
summarizes Potvin.

Taxation, disbursement and
inheritance: a financial headache to solve

Business people’s wealth is often complex and requires significant
tax planning so that they’re able to optimize the sale of their
business and dispose of their assets. Yet, 43% of family businesses
have no succession plan, and 30% have only a very informal
one.3 “When you’re busy running your business, you can
sometimes overlook what still seems far ahead,” says Potvin.

That’s why, for almost two years now, National Bank has brought
together its specialists in business transfers, business banking and
private wealth management within a single team. “For an
entrepreneur, it’s often the transaction of a lifetime,” says
Geneviève Turbide Potvin. It’s an emotionally charged process for
which expert guidance and careful preparation — ideally two to five
years before the transaction — are essential.”

Forging the province’s economic future

Quebec has a diverse economy, an abundance of natural resources and
access to the most affordable energy in North America. Supply
challenges are conducive to a strong comeback of the local
manufacturing industry. Many local businesses are ideally positioned
to take advantage of this and will soon be up for sale. Who, then,
will take over these precious sources of employment and prosperity?
“Every business we keep in Quebec is another step towards a rich
and sustainable province,” concludes Potvin.

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