Keeping it out of the family

More Canadian business owners opting to sell over passing along, PwC survey says.

March 14, 2011   by Canadian Manufacturing Daily Staff

TORONTO‑Almost half of Canada’s family business owners have not chosen their next leader, according to PwC’s last Global Family Business Survey.

The survey suggests those who have planned for the future, are taking non-traditional approaches about their businesses, like selling, rather than pass the company along to a family member.

The survey found only 48 per cent of Canadian family business owners plan on passing their family business onto the next generation—a significant drop from 90 per cent in 2007.

“We’ve found that by the second and third generations, either the company doesn’t survive or family members are less interested in running the family business,” says Sharon Duguid, director of the Centre for Family Business and Entrepreneurs at PwC.

Within the next five years, the survey found 27 per cent of owners anticipate a change in ownership of their business. Among those who predict a change of ownership, 33 per cent plan to sell to a private equity investor, up from 14 per cent in 2007, while 22 per cent plan to sell to a management team.

“It’s possible that the global downturn led people to re-evaluate their plans. People are thinking harder about whether family members have the talent to take over the business,” says Tahir Ayub, Canadian leader of PwC’s Private Company Services practice. “Another factor is that succession is happening much later. The natural successor may be in their fifties when the owner is ready to transition out of the business.”

Half of the study’s respondents said their companies were owned by the first generation; 34 per cent by the second generation; and only 16 per cent by the third or more generations.

The PwC Global Family Business Survey 2010-2011 covers small and mid-sized family companies in 35 countries, including 100 Canadian companies

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