There has been a healthy rebound in M&A activity in the past year. Canada has been seeing a high volume of M&A transactions in 2021. If you are thinking of buying or selling a business, there are a few trends that you should be aware of.
1. There are a significant number of business transitions projected in Atlantic Canada. In fact, the Atlantic Provinces Economic Council (“APEC”) has estimated that 25,000 businesses will change ownership in the next two decades in Atlantic Canada.
2. Many entrepreneurs are shortening their timeline to sell their businesses. The global COVID-19 pandemic has caused everyone to pause and to think about the future. Business owners are showing a growing eagerness to monetize their businesses and to retire earlier.
3. Intergenerational transfers of business are declining. There is an increasing trend of children of entrepreneurs wanting to establish their careers outside of the family business. This means that business owners, in some cases, have one less option to transfer their businesses.
4. Due diligence is becoming even more comprehensive as purchasers are digging deeper to understand the overall impacts of COVID-19. Purchasers want clarity on items such as (and this list is not all inclusive):
5. The use of deferred compensation to match seller price expectations has become more prevalent. This means that many offers to purchase businesses include vendor financing (the owner essentially providing a loan with interest only payments in the first few years) and earn outs (the businesses must meet certain profitability targets after the sale for the owner to collect a portion of the purchase price).
It is highly recommended that you consider an advisor when you are buying or selling a business. An advisor can do many critical things including helping you understand the value of a business, connecting you with sellers or buyers depending on which part of the market you are in, developing an acquisition or an exit strategy and maximizing the terms of a negotiation so that you get the very best outcome possible.
MC Advisory has prepared this document for information only; it is not intended to be business advice. You should consult MC Advisory about your unique circumstances before acting on this information.
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