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Retiring Business Owners To Transfer $1.9 Trillion In Business Assets In The Next Five Years - Largest Turnover Of Economic Control In Canadian History: CIBC

Stocks in this article: CM

Transfer poses risks to Canadian economy via reduced productivity, job losses, premature sales and increased bankruptcy rates

TORONTO, Nov. 13, 2012 /CNW/ - The owners of Canada's small- and medium-sized businesses are set to retire in record numbers and this will see $1.9 trillion in business assets change hands in the next five years alone which could pose significant risk for the Canadian economy, finds a new report from CIBC World Markets. 

The report notes that 310,000 business owners, close to 30 per cent of small- and medium-sized businesses in Canada, will exit ownership or transfer control of their companies within five years. Within the next ten years one-half, or 550,000, of owners will exit their business.

"The economic implications of the accelerated pace at which firms are changing hands should not be underestimated," says CIBC Deputy Chief Economist Benjamin Tal. "The demographic realities of Canada in general, and the small and medium-sized enterprises in particular, suggest that succession planning is increasingly becoming a critical issue. In the coming five years, an estimated $1.9 trillion in business assets are poised to change hands — the largest turnover of economic control on record. And by 2022, this number will mushroom to no less than $3.7 trillion.

"Given this magnitude, a faulty or badly executed succession planning process could have a ripple effect throughout the Canadian economy via reduced productivity, job losses, premature sales and increased bankruptcy rates. This potential cost is significant. The firms that will change ownership in the coming five years currently employ close to two million people and account for no less than 15 per cent of GDP."

Mr. Tal notes that these numbers highlight that succession planning is no longer just a micro issue that impacts the businesses involved, but also, increasingly, a macroeconomic issue, capable of affecting the growth potential of the economy as a whole.

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