With the largest generation in history reaching retirement age, it is no surprise that 2020 spurred an uptick in private-business owners 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. The events in 2020 have reminded us that we cannot take anything for granted and have motivated us to thoughtfully reassess their priorities, short- and long-term goals, and ideal timing for realizing their desired outcomes.
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:
“Is the window of opportunity to transition my business now?”
Given the recovery in the M&A markets that has occurred in the last two quarters, the answer is an emphatic yes.
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.
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.
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 in 2020 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.
We have helped business owners navigate 2020 to help 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.
2021 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 plan to leave.
Karl Sigerist is a Managing Director at the Shaughnessy Group where he serves as an Advisor to entrepreneurs and executives wishing to sell their business, grow through acquisition, or management buy-outs. As the founding member of five privately-owned start-ups, two start-up business units within the public company environment, Karl has led turnarounds of 3 Canadian and 1 European subsidiary of a public company.
At the Shaughnessy Group our team members have decades of start-up, growth, recapitalization, turnaround, restructuring, mergers, and acquisitions experience across variety of industries originating, arranging, structuring closing mergers, acquisitions, equity, debt & securitizations capital raising transactions for the best-known public and privately held Canadian companies. Having led organizations and strategic transactions through Black Monday (1987), the Russian Flu (1998), the Dot.com Bubble (2000) the Global Financial Crisis (2008) and the 2020 Pandemic.