Vital Information About The Sale or
Acquisition of a Business
• Whether you are buying or selling a
business to a third party, or transferring it to a new owner within your
family, a business ownership transition plan is an important step in
ensuring a successful transition.
• An important part of any business
ownership transition plan is to
engage your lenders and vendor
partners early on in the process as
you may require their prior consent
to the transfer.
• Engaging lending and vendor partners in the transition process will
help ensure that there are no unwelcome surprises during or after the
transition. The buyer’s decision will
likely be influenced by whether or
not the rights to the vendors’ product lines and adequate financing will
be available under new ownership.
• Your transition plan should include
the goals, priorities and timelines in
place for a successful transition from
the current business owner to the
next.
• GE Commercial Distribution
Finance Canada (CDF) has collaborated with many clients on business
transitions and is a resource available to you to help ensure you are
prepared for this transition.
What is a Business
Ownership Transition Plan?
It is a formal plan that puts the goals,
priorities and timelines in place for a
successful transition from the current
business owner to the next. Without a
clearly defined plan, business owners
who are buying or selling a business run
the risk of being unprepared for certain
challenges.
Over the years, your CDF team has col-
laborated with many businesses through
ownership transi-
tions and we find in many
cases that neither the selling business
owner, nor the new acquiring business
owner have an adequate transition plan
that ensures a smooth transition for the
business.
Why is it Important to Have a
Transition Plan?
• Selling parties find it may result in
tax benefits, improve the business’
financial stability, maintain employee
harmony and improve the value of
the business.
• Acquiring parties find that a transition plan may better prepare them to
be a business owner, assist them
with stakeholder relations, and minimize their personal financial liability.
What are the Major Considerations?
• Management Succession: This includes
personnel evaluation, training and
development and mitigating the
resistance to the change in management from the rest of the employees.
• Ownership Succession: This means
estate planning issues, tax issues,
liquidity issues, retirement needs
and interests of third parties.
Keeping the Business in the Family
or Selling to a Third Party?
This is a key and difficult decision in
most business ownership transfers. It is
important to make the decision with
objectivity and an acknowledgement
that family successions are difficult to
implement and some younger generation family members don’t always have
the interest, management skills or
entrepreneurial spirit necessary for a
business to thrive. And if you choose to
maintain the business within your family, consider that over the years, you have
likely developed a relationship with
your financial partners like CDF; a transition period, during which the exiting
owner is still involved in the business
may be beneficial to developing a similar
rapport with the new ownership.
You should also consider the advantages of selling the business – it may free
up capital for retirement needs as well as
for the next generation to pursue their
interests. But there are challenges in
finding a third party buyer as well. If you
are not transferring your business within
your family, you need to consider potential buyers, like employees, competitors,
large customers or suppliers, or strategic
investors.
In the end, regardless of whether the
business will be retained in the family or
sold to management or third parties,
every business owner needs to start
early, before a crisis hits (death, disability, etc.). Hire good advisors and develop
a comprehensive business ownership
transition plan made up of a management succession plan and an ownership
succession plan.
The goal of the management succession plan is to mitigate issues related to
human considerations (i.e., the new
management team’s experience, training
