Business transfer at the heart of economic activity

Business transfer at the heart of economic activity
Business transfer at the heart of economic activity

A new phenomenon has just taken root in Quebec’s economic reality, while since 2021, more transfers and buyouts of existing businesses have taken place than new ones have been created. A dynamic which is set to gain momentum over the coming years and which will accelerate.

Posted at 1:45 a.m.

Updated at 6:30 a.m.

We knew and were often reminded that the massive arrival at retirement age of the cohort of baby boomers who launched their businesses in recent decades would create a bottleneck when they would decide to transfer ownership of their business.

However, this sales movement is well underway and is starting to gain more and more momentum, as evidenced by a study that has just been made public by the Quebec Business Takeover and Transfer Observatory (ORTEQ).

According to a database containing more than 180,000 companies observed each year between 2015 and 2021, the ORTEQ study counts that nearly 7,400 company transfers took place annually, for a total of 52,000 transactions. during this period.

We are talking here about companies that are sold or transferred to members of the same family, companies that are the subject of a buyout by their managers or their employees, a sale to an external strategic buyer or to a group of investors (private investment firms, family offices, etc.).

In short, there are many typical cases and they reached a peak in 2021 when there were 8,600 business transfers, which marks an increase of 31% compared to 2015. It is also in 2021 that the number of transfers business in Quebec has surpassed that of the creation of new businesses.

These figures surprised me a little, since in 2021, the Quebec Business Transfer Center expected the number of business transfers to cross the 15,000 mark for that same year, or close to the double what was officially recorded.

“In 2021, we reported on the transfer intentions that the owner-managers wanted to achieve, we did this based on surveys.

“We were coming out of COVID, many had delayed their plans to sell their business and many wanted to do so. The new data from ORTEQ shows monitoring that has been carried out with 180,000 companies for six years now,” Alexandre Ollive, CEO of the Quebec Business Transfer Center, told me.

Transactions in progressogression

ORTEQ was created by the Quebec Business Transfer Center, under the direction of Professor Marc Duhamel, of the University of Quebec at Trois-Rivières, and is supported by the Desjardins Movement, in particular.

Desjardins Group also confirms from its experience in the field that the number of business transfers will increase and accelerate.

“We carry out 1,500 to 2,000 takeover financing transactions on average. This year, we plan to do more than 2,000 and between 3,000 and 4,000 in subsequent years,” observes Jean-Yves Bourgeois, Senior Vice-President, Business Services, of Desjardins Group.

According to Jean-Yves Bourgeois, several transactions were not carried out in recent years because there were more companies that were ready to be sold than there were companies capable of absorbing them.

One thing is certain, there is no shortage of capital to finance company buyouts, with all the players who are ready to intervene in the market: the Caisse de dépôt, the Solidarity Funds, Fondaction, the BDC, the banks, private investment funds, family offices…

For example, the Desjardins Group portfolio dedicated to supporting business transfers is nearly 10 billion in debt and equity in a proportion of 90%-10%.

“We are recruiting and setting up new teams to meet demand, but it is among professionals such as lawyers and tax specialists where we feel that it is more difficult,” notes Jean-Yves Bourgeois.

And while it is all well and good to want to pass the torch, it takes someone to pick it up somewhere.

Sometimes, strategic buyers shy away from the asking price being too high. It also happens that financiers do not want to participate in a management buyout if the price is too high or does not take into account the investments that will need to be made to upgrade the company.

However, the economic activity surrounding these property transfers is not negligible, since from 2015 to 2021, they involved up to 26 billion in assets each year and affected up to 120,000 employees annually.

What is also notable is that businesses that have undergone a transfer of ownership are among the best performing in Quebec, posting average revenues of 4.8 million, or 9.2 times more than the revenues generated by businesses newly created.

While growth in business transfers is observed in all industrial sectors in Quebec, it is the transportation and warehousing industries that dominate, followed by the construction industry and the manufacturing sector.

ORTEQ plans to update its annual study next fall and will then reveal the number of property transfers that take place during the year 2022, results which will unsurprisingly confirm the movement which is well underway.



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