If the mass retirements of baby boomer entrepreneurs have generated an ever-increasing number of sales, mergers and acquisitions of companies over the last ten years, the number of transactions has plateaued for the past two years. The movement should, however, benefit from a better context to start growing again in 2025, anticipates Christine Pouliot, partner at PwC Canada.
The past two years have seen rising inflation and interest rates, which has caused a slight cooling in corporate sale and acquisition activity, a trend that had already begun to be observed with the outbreak of the COVID pandemic.
“Many business owners have decided to postpone listing their businesses because of COVID. They delayed their project because they first wanted to return to growth and show good financial performance.
“The rise in interest rates has, however, dampened the enthusiasm of many buyers, but the Bank of Canada has just sent a very positive signal by reducing its key rate for the first time,” underlines Christine Pouliot, associated with the Group. Transactions at PwC Canada and Managing Director of the Mergers and Acquisitions group in Quebec.
Christine Pouliot has been navigating the world of business-to-business transactions for more than 20 years. With a master’s degree in finance and the title of chartered financial analyst, she has led PwC’s Transactions Group for four years, which has grown significantly in recent years.
“In 2017, there were 15 transaction professionals and our team now has 30. We have progressed at the rate that transactions are increasing. We are the largest group of mergers and acquisitions professionals in the mid-market of SMEs with a turnover of between 20 and 500 million,” summarizes the general director.
We knew that the retirement of baby boomers would cause an unprecedented wave of business sales, but we realize today that this reality will last for at least the next 10 years.
“There are a lot of business owners who have delayed selling their business. Even at age 75, they are hesitant to do so. And it is estimated that nearly 60% of companies will be put up for sale over the next 10 years, so we will not stop seeing transactions,” notes Christine Pouliot.
Despite the abundance of transactions that will have to be carried out over the coming years, there will be no shortage of sources of financing, while it is estimated that private investment funds currently have more than 1,300 billions in cash that they can deploy anywhere in the world.
“The proliferation of private investment funds and the growing presence of large investors such as the Solidarity Fund or the Caisse de dépôt as well as the development of “family offices” now represent an important part of the transaction financing offering,” notes Christine Pouliot.
Twenty years ago, when she started in the business, financial investors (private investment funds and institutional investors) only participated in 10% of transactions while strategic investors (a competing or foreign company ) alone concluded 90% of business purchases.
Today, financial investors are involved in at least 40% of business-to-business transactions, with varying levels of intervention.
“A private investment fund like Walter Capital or Claridge will take minority stakes while specialized funds like Novacap will take majority stakes.
“These funds give more options to entrepreneurial owners who can sell 100% of their business to a strategic investor, sell the majority to a fund and keep a minority stake or sell a minority portion to a large investor like the Caisse and monetize a part of their business,” recalls Christine Pouliot.
One thing is certain, business owners who decide to make a family transfer or sell to an outside buyer must take particular care to keep in place the key employees who participated in the success of their business.
Christine Pouliot always works alongside the selling business owners whom she will support throughout their efforts, and the important thing, according to her, is to prepare well and above all to have a story to tell.
“It’s not like selling a house where you put up a sign and then wait for buyers to come through. You have to arrive with a good history of growth and good prospects.
“That’s why we’ve seen a plateau over the last two years. Several owners preferred to restore their balance sheet and wait for financing conditions to improve. But the movement will resume, that’s certain,” assures Christine Pouliot.