“What is the single largest baby boomer retirement issue? Pension solvency, retirement savings levels, healthcare funding – all important but we believe the one that overshadows all others in terms of absolute dollar size is the question of from where will the capital come to acquire the large cohort of private, baby- boomer businesses coming onto the market? Without the ability to sell their businesses for reasonable valuations baby-boomer entrepreneurs may find it a challenge to fund their retirements. Just how large of an issue is this funding gap? In a recent report CIBC estimated that “$1.9 trillion in business assets are poised to change hands in five years – the biggest transfer of Canadian business control on record.” and that “by 2022, this number will mushroom to at least $3.7 trillion as 550,000 owners exit their businesses…”

Echoing the CIBC data, accounting firm Deloitte states “Though Canada is known for its large banks and resource giants, a large part of the economy remains underpinned by over 2.3 million small businesses across the country. Many of these businesses were founded – and continue to be run – by entrepreneurial baby boomers. These mature companies are often stable, well-run and cash-rich income providers for the generation that started them. However as these baby boomers begin to retire, SMEs [Small and Medium Enterprises] will undergo a massive collective ownership transfer.”

So how will this large cohort of entrepreneurs exit and at what price? The question will come down in part to the amount of acquisition capital flowing into the SME space. Given that this estimated $2 trillion of businesses is twice as large as the assets of the top 1,000 Canadian pension plans and approximately the same size as Canadian annual GDP this is a question without an immediately obvious answer.”

May 2, 2014 – Who Will Buy These Baby Boomer Businesses