I sat down with some financial investors last week to talk about succession planning. Theirs, not mine.
Their plan is to buy SMEs owned by baby boomers like me and hold these companies for many years and then sell them off at a profit at some time in the future. What was unique is that they aren’t talking about exiting in five years with an IPO or some other equally fantastic scenario built on cheap and reckless debt. They seem to know what they want, and there is no doubt a lot of SME business capacity owned in this country is going to be consolidated into global companies, transferred to children, sold to managers or die in the hands of an unsuspecting spouse after an unanticipated heart attack.
Succession is a huge issue today and baby boomers are leaving a trail of debris for future generations to clean up.
In the broad stroke, we don’t need to look any further than pensions. Fat defined benefit packages are quickly becoming a thing of the past. They are unaffordable. Baby boomers will be the last recipients of these outsized benefits.
We don’t need to look any further than the recent riots in London, England. University tuition in many jurisdictions is going to be more expensive in the future because there is no more public money to invest.
We don’t need to look further than the flash floods and tornadoes that are becoming standard fare in a world of manmade global warming.
We are bequeathing a media landscape that is terribly diminished (a concentrated ownership with lowest common denominator values) and technology that is out of control.
The worst of it is the financial debt. It is overreaching and limits our ability to fix anything.
Of course, there are more generations than boomers accountable for massive public and private debt, but boomers have led the way and have been the adults in charge for some time.
Boomers can’t abide succession and yet it is their most important responsibility.
Succession is important to families, to companies, to cities and countries. The question is who is in charge of succession. Logically, it is those who have something to pass on, whether it is wealth or character.
Some years ago, I went to the City of Greater Sudbury and offered to help set up a private/public succession planning program that would pay companies half the cost of doing a succession plan for their business if it involved selling to a local buyer, to managers in the business or transferring to the next generation. My theory was this:
A) Nothing you can do as a city in Northern Ontario is more important for your long-term economic success than ensuring you have as much local ownership of business as possible. Local owners sit on committees, donate to local charities, keep decision-making at home, hire local lawyers and accountants, and have a vested interest in the success of the community.
B) Business owners, if approached in the right way, would understand the importance of local ownership to the community and, having made their money in that community, might be less greedy (perhaps a better word is aggressive) about extracting immediate value for their company.
This of course is naive. We live in a capitalistic society. This was confirmed by my financial planning friends who said they found little indication owners were willing to take less money, or less money immediately, if they happened to be family or managers, or local investors. Taking less money runs counter to a lifetime of building, striving, competing, profiting, losing, risking again and so on. Entrepreneurs are proud and battle-scarred. They want full value for their life’s work to prove, well, that it was worth doing.
We need to pay more attention to what is important. Sustainability is important. We all have a role to play in helping our communities grow and it is fair to give back to our communities by insisting our companies remain strong and local where possible.
No person is an island and no one built their business without the help of their predecessors, whether it is the rule of law and freedom we defended at war or the educational system that was built to help us compete.
It is a new year. Hope springs eternal.
President of Laurentian Media Group