When retirement is around the corner, many Quebec entrepreneurs will have to choose between putting the key under the door and transferring their business to successors. Regardless of the amount of time or number of hurdles involved in the transfer, transferors can count on public and private partners to help them. This section is one of our awareness-raising initiatives about the challenges of a successful transfer.
For the third year running, the Board of Trade of Metropolitan Montreal and the Fonds de solidarité FTQ are calling for action to ensure the continuity of local SMEs with the imminent retirement of their owners. Entrepreneurial succession is a major challenge and deserves our full commitment. One finding from the 2014 study Transferring Businesses to the Succession: A Major Issue for the Quebec Economy and the Sustainability of SMEs is striking: if nothing is done, the issue of business succession will be felt in every sector of the economy: employment, investment competitiveness, regional development, tax revenue and Quebec’s prosperity. In spite of the critical importance of business transfers for our economy, entrepreneurs can be reluctant to embark on this long, complex process, or even to disclose their intentions, given the emotional and strategic nature of such a change. The issue of business successions is alive and well! Yet there are many successful transfers; just look at the three testimonials in this section. The key to success can be summed up in two words: planning and guidance. If you plan to transfer your business, you should know that you can count on qualified people to plan and obtain the financial support you need. A successful transfer is possible, so we encourage you to take on the challenge.
The Government of Quebec is proud to be associated with RDV Relève 2016, organized by the Board of Trade of Metropolitan Montreal and the Fonds de solidarité FTQ. Entrepreneurship in Quebec is an ongoing issue for our government. According to a study by the Board of Trade of Metropolitan Montreal conducted as part of the first RDV Relève, almost 30% of owners who want to retire in the next 10 years plan to close their business without trying to sell. This situation concerns us, because businesses are the driver of the Quebec economy, and many jobs are at stake. It is our duty to support businesses and prepare them to face the challenges of entrepreneurial succession. There are many complex issues surrounding a business transfer. But entrepreneurs who want support in managing human resources and developing skills to plan the transfer of their business can talk to Emploi-Québec. I encourage anyone touched by these issues to take advantage of RDV Relève 2016 to explore possible solutions and tap into the expertise of the people who participate in it.
Minister of Employment and Social Solidarity
Visit the Ministère du Travail, de l'Emploi et de la Solidarité’s website http://www.mess.gouv.qc.ca/
are at risk of closing in the next 10 years Total gross loss of $8.2 billion to $12 billion in GDP and 79,000 to 139,000 jobs.
of entrepreneurs age 65 close their business because they cannot find buyers.
Identifying successors is the biggest obstacle according to 78% of business owners.
Identifying successors is the biggest obstacle according to 78% of business owners.
of owners think that the lack of succession within SMEs will affect the economic growth of Quebec.
of owners would prefer an internal buyer (a family member or employee).
of entrepreneurs age 55 know the market value of their business.
of Quebecers who start a business prefer to take over or buy an existing business.
of Quebec owners underestimate the time it can take to prepare and complete a business transfer.
of Quebec entrepreneurs have no plan for transferring the management of their business.
of owners admit that selling their business is a psychological hurdle.
1 - Board of Trade of Metropolitan Montreal. Transferring Businesses to the Succession: A Major Issue for the Quebec Economy and the Sustainability of SMEs, June 2014.
2 - Fondation de l’entrepreneurship’s Centre de vigie et de recherche sur la culture entrepreneuriale, in cooperation with the Caisse de dépôt et placement du Québec. La relève est-elle au rendez-vous au Québec?, November 2010.
3 - CROP-RCGT. Survey La relève entrepreneuriale: un enjeu de taille pour l’avenir économique du Québec, November 2013.
4 - Fondation de l’entrepreneurship. Survey, 2010.
According to the study Transferring Businesses to the Succession: A Major Issue for the Quebec Economy and the Sustainability of SMEs, only 10% of companies are handed down to a second generation. Équipements industriels Joliette (EIJ), an industrial distributor that specializes in MROP supplies and services, falls within that small percentage. Louis Desrochers’ father founded EIJ. Five years ago, Louis transferred the business to his daughter Marie-Claude. At the time, Louis had two businesses, which was becoming a strain. “I had received some serious offers for EIJ, but there was no way I was going to sell,” he said. Marie-Claude hoped to take over the business, and she had prepared for it. She had gone to school for it, and her father taken care of her hands-on training by putting her to work in every department. For the last two years, father and daughter managed the business together. “She took the reins gradually. We had offices next door to each other. I could see that she was gaining confidence.” The handover took ten years. There was no particular friction in the family. And the employees and clients gradually got used to Marie-Claude. “Every time I would visit a client, Marie-Claude would come with me. When I finally stepped back, it wasn’t a shock.” Louis didn’t take any particular training, but he asked for advice from the professionals around him (tax expert, accountant, lawyer). The current tax system penalizes family transfers, but in his case, getting the top sale price was not the priority. Louis and Marie-Claude had their share of issues. “For the first two years, Marie-Claude was a little uncomfortable. But in the two following years, she figured out how to carry out her plan.” Louis had never been so worried in the 34 years he spent running the business. “It’s like sitting in the passenger seat after having driven your entire life. After the transfer, I was afraid of everything. But times are changing. The business needed a new approach.” Every transfer is unique. “We followed the path that was logical for us. I think you have to set clear goals and, most importantly, take your time. It took a number of years for Marie-Claude to achieve her goal. For the past year, she has been happy,” Louis, the proud father, says.
Visit the Équipements industriels Joliette website http://www.eij.ca
Two years ago, when Denis LeBrun wanted to sell his bookstore because retirement beckoned, he was sure about one thing: he wouldn’t be selling to a chain. “I wanted Pantoute to stay independent.” When other bookstores contacted him, his decision was made; he would sell the store to his employees. Two employees in positions of responsibility bought half of the 51% of shares owned by Denis and his wife, Claire Taillon, and created a non-profit business. Their colleagues formed a cooperative and bought the other half. “It’s a form of organization that works perfectly; the two managers make decisions, and the cooperative gives its all to the bookstore.” The transfer went off without a hitch, with each of the parties represented by their lawyers and the cooperative receiving financing from Filaction.
“It took the amount of time I had anticipated, around a year and a half,” Denis said. “The two managers know the bookstore and its operations inside and out. Their takeover plan was well put together. Claire Taillon, at the time manager for the two stores, stayed for eight months after the sale to advise them. Denis had said his goodbyes to his employees, his loyal customers and his occupation one year earlier as part of a large-scale communication campaign for Pantoute’s 40th anniversary. A catalogue, 40,000 copies of which were distributed, told the story of the bookstore and announced the takeover. Of course, the decision wasn’t an easy one. “Pantoute is my whole life,” said Denis, who got his start by becoming the owner of a small used bookstore before founding the institution that Pantoute is today, with its 40,000 titles. Denis is a happy man. By selling to his employees, he has protected jobs and ensured Pantoute’s continuity. The new managers have put their personal touch on things of course, but the Pantoute spirit lives on. “The employees are proud to be owners. It gives them additional motivation. I enjoy going to the bookstore; I am always greeted with a smile.”
Visit the Librairie Pantoute website http://librairiepantoute.com
When you are at the helm of a company you have created, succession is often the last thing on your mind. Not so for Bruno Gautier, founder of the media group Infopresse. “I started thinking about what was next ten years ago,” said Bruno, age 62, who sold his business six months ago. Bruno approached potential groups and investors, but he ended up finding his buyer internally: Arnaud Granata, who had been vice-president and director of content since 2009. Clodine Chartrand would later join Arnaud as the company’s vice-president and COO. “For the same price, I preferred an internal solution. It provides continuity. And it’s a lot simpler.” Bruno became a minority shareholder. He is no longer involved in operations; his successors handle everything. He only attends board of directors meetings. “After 30 years at the helm, it’s hard not to get emotional,” Bruno said. The employees were prepared for it. “It didn’t come as a shock, although it was difficult for some of them.”
The announcement to the general public was done through a press release. Clients started talking directly to the buyers, who still benefit from Bruno’s support and advice. “It’s not a straight line,” Bruno said about the transfer process. “It’s full of surprises and the unexpected.” Bruno did not take any particular training, but he sought guidance. Lafond et Associés, consultants for Infopresse for the past 20 years, studied many aspects of the succession, such as the buyers’ strengths and weaknesses. Financing for the transaction was done in cooperation with Desjardins Venture Capital and the Fonds Relève Québec. Bruno didn’t use a particular tax strategy: “Everything is in place; we pay the taxes.” Bruno is confident that his successors will do well. “We’ll see whether the results are there in a few years, but they have what it takes. It’s a changing industry, but we are known for our ability to adapt.”
Visit the Infopresse website http://www.infopresse.com
The Centre de transfert d’entreprise du Québec (CTEQ) guides Quebec entrepreneurs through the process of transferring a business. A business transfer is a unique step in an entrepreneur’s life. “The CTEQ’s role is to clarify and facilitate this process with the objectives of making a successful transfer and putting all the odds in the favour of the business’s future success,” says Vincent Lecorne, director general.
The CTEQ team operates across Quebec with advisors who are active on the ground. “Every business transfer is a one-of-a-kind story with human aspects and emotional issues,” Vincent says. With confidentiality a top priority, the CTEQ makes building trust with entrepreneurs the foundation of its services. They can contact CTEQ no matter what stage they are at.
Entrepreneurs explain their intentions and expectations, enabling an initial diagnosis about the transferability of the business. “Some entrepreneurs need complete guidance, whereas others are looking for a bit of advice to finalize their efforts,” Vincent says. If the transfer is viable, a plan that sets out priority efforts is put into action. The approach has to be a global one. The CTEQ points entrepreneurs to the right resources and experts, but they remain free to make their own decisions. “We give the process momentum, while trying to limit the costs,” says Audrey Azoulay, the CTEQ’s director of strategy and development.
There is still the delicate matter of the buyer, and the choice is not always obvious. This is why the CTEQ creates ties between entrepreneurs. The organization has the Index, a database of sellers, buyers and transfer experts, which helps make connections. Founded in 2015, the CTEQ unveiled its service offer in December. Now entrepreneurs who want to successfully transfer their business have someone they can turn to.
Visit the Centre de transfert d’entreprise du Québec’s website ctequebec.com
Éric Dufour, national leader in business transfers at Raymond Chabot Grant Thornton, is clear on one point: “There are no failures (when it comes to transfers), there are just solutions. You just have to take the time and identify the issues.”
Since accountants and tax experts are confidants for 95% of entrepreneurs, it was only natural that Raymond Chabot Grant Thornton set the mission of offering entrepreneurs support in the face of their fears. Through its network, which includes Quebec and the Ottawa and Edmundston areas, the firm has put in place multidisciplinary teams with a human resources and management consultant, an accountant, a tax specialist and an industrial psychologist, all headed up by an integrator.
During meetings between the entrepreneur and the integrator, five areas of resistance are identified: the seller’s grief, confidence in the successors, financial feasibility, taxation and financing the transaction. Raymond Chabot Grant Thornton builds a succession plan that takes five to eight years. They think more in terms of processes than steps, because, depending on the transfer, some areas of resistance require more in-depth work from certain members of the integrated team, training in best business practices or the involvement of a partner from the firm.
“There are nothing but benefits in a transfer,” Éric says. On the one hand, it allows sellers to provide for their retirement and see their business reach new heights, and, on the other hand, it makes it possible to develop resources, invest in modernizing the company and retain qualified labour, creating innovation and wealth in Quebec. “It’s a winning situation for everyone,” Éric says.
Visit the Raymond Chabot Grant Thornton website http://www.rcgt.com/en/services/strategic-performance-consulting/business-transfers