IS NOW REALLY THE TIME TO PLAN FOR OUR BUSINESS TRANSITION?
The Environment
With the largest generation in history reaching retirement age, it is no surprise that private-business owners are proactively exploring their options for retirement and succession planning. Then, the pandemic hit, creating economic uncertainty and a temporary paralysis of the markets.
The ongoing economic environment have forced business owners to reconsider the timing of plans that may have included walks along the beach, lazy afternoons, and evening sunsets. Recent events have reminded us that we cannot take anything for granted and have motivated us to thoughtfully reassess our priorities, short-and long-term goals, and ideal timing for realizing their desired business transition outcomes.
Sector Trends
Whether your company is in one of the industries hit hardest by the pandemic or you have experienced unexpected growth from the disruption, you are left asking yourself: Given the recovery in the M&A markets that has occurred in the last two quarters, the answer is an emphatic yes.
Valuations & Interest Rates
The path forward will vary from business to business, but the opportunity still is for business owners to take advantage of high valuations and historically low interest rates. The M&A marketplace has stormed back to life, with quality Canadian companies attracting significant interest from serial entrepreneurs, foreign investors, strategic buyers, and private equity firms flush with capital.
Dry Powder
The availability of equity capital combined with historically low interest rates have created an imbalance of supply and demand with more interested buyers than sellers. The result of this imbalance is a marketplace that currently favors sellers in all industries not decimated by the pandemic. After a temporary freeze in the market this time last year, private company valuations have rebounded strongly and are now at or above pre-pandemic levels, with many buyers willing to ignore temporary declines in profit during Covid-19-impacted periods.
Wealth Preservation
As a result of these current market conditions, owners should be confident in continuing to pursue future planning that accounts for the changes they have experienced and the unknowns that loom in the future, especially if multi-generational wealth preservation is top of mind. Do not slow your momentum. Investigating the process now is beneficial before potential tax increases and other changes in the next year or so.
Still wary about making a big move in this environment.
Explore Your Options
We have helped business owners navigate by helping them to decide whether to move forward with a potential transaction or stay put. We can use strong M&A dynamics to garner attractive valuations and deal structures, particularly for businesses in industries that have seen growth despite the pandemic, like manufacturing and business services.
This year will be pivotal for private of family business owners looking to retire or sell in the next few years. An experienced advisor can supply insight into the market for your specific industry, and potential options and timing for your business based on your unique circumstances. The answers you look for may seem elusive now but asking the right advisors the right questions will set you on the straight and narrow path toward realizing your best outcome.
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