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Insights into M&A Considerations for Private Businesses in the Current Recession
"Life is like an airplane journey. No matter how good the takeoff no matter how good the flight, if you have a crash Unding, then it was all for nothing. I am coming in for a Unding now. The important part of my life is just beginning. "
- Soichiro Honda, Founder, Honda Motor Company
Many of us have seen an increase in the number of businesses suffering "crash landings" - whether due to a drop in sales or difficulty obtaining financing. The woes of the stock market, the housing sector, and the auto industry are well documented and regularly reported in the news media. But when a friend of mine called recently to tell me that he was folding his small wholesaling business because of the recession, it brought the issue much closer to home. I realized on a more personal level just how badly the economic slowdown is affecting private businesses. It made me wonder how many other private business owners might be stuck in a holding pattern, running out of fuel.
Most of us know private business owners who, having put the better part of their lives into their businesses, are now hoping to sell their businesses and retire comfortably. We may also know entrepreneurs who are on the verge of investing large sums of capital into private business ventures. So just how severely are these sellers and buyers being affected by the recession, and what advice should professionals be giving them?
My network includes professionals involved in advising clients who are buying and selling private businesses. I spoke to three contacts with different specialities to get their insights. Don Sihota, LL.B., is a partner and business lawyer with the firm of Clark Wilson LLP; Kevin Wong, CA, is a senior tax manager with Dale Matheson Carr-Hilton Labonte LLP, and James Gallagher is the regional vice-president of corporate finance at BMO Bank of Montreal.
Iqbal Tejpar, CA, CFA: To begin with, I assume that you've all seen a drop in activity in the sales of privately owned businesses since the local economy took a turn for the worse. True?
Don Sihota, LL.B: Yes, there has been a off in the...