Ideas & Stories

The New Heady Days of Succession

Nothing like a good pandemic to shake things up!

Every decade or so, an upsurge in activity in capital markets drives interest in mergers, acquisitions, takeovers, and sales of businesses. Understandably, this also underpins strong interest amongst the owners of private and family businesses to think about their futures too.

Succession planning becomes a priority. No more putting it off.

The last wave of intense activity was in the first decade of the 2000’s. And it was hectic! All those baby boomers in business suddenly realised that they were ‘mortal’. It was time to think about the future of their business, their family, their wealth and frankly, their lifestyle for their remaining years.

We were busy. One of the major banks asked us to undertake succession planning for their clients, right across Australia. We built a bespoke program for them, and then undertook 47 full succession programs for their clients. That’s on top of all the other succession work we were doing.

Then the GFC hit… Hard.

Suddenly there were no external buyers. Businesses struggled and profits dried up. Valuations plummeted, finance disappeared, and nobody wanted to sell into an empty market. Even inter-generational transitions stopped. Mergers and acquisitions became purely opportunistic (pretty good strategy if you’re the buyer) and once again, succession was put on the back burner.

But these owners are not getting any younger!

Ever so gradually, activity has resumed. An acquisition here, a sale there and… interest in succession planning has steadily grown, particularly over the last 5 years. Finally… baby boomers were returning to thoughts about the future. After all, they were now a decade older than when the music stopped the last time.

As we all know, early last year, the world changed. COVID hit hard and changed everything.

Initially, we were in rescue mode. Massive lockdowns delivered devastating outcomes for so many clients. And that has continued for many… right up to this day, particularly for those in hospitality and entertainment.

But huge government subsidies and spending, together with historically low interest rates, have created a two-part economy. One part struggling to survive, the other part booming.

Overall, the world economy has been doing very well. Of course, this has been accompanied by a huge return of capital market activity.

Every week, something new seems to happen with at least one of our clients… that ‘knock on the door’, that potential buyout of a competitor, the introduction of key management into equity, admission of new partners, or driving the process for moving the business to the next generation within the family.

All underpinned by cheap and easy money.

As you might expect, we are once again very busy helping clients deal with all aspects of succession, whatever that might mean for them. And we have been really busy ever since the first lockdown.

Succession always starts with strong business performance. To get a good outcome, you need a good business. A good business is usually an outcome of good business planning and diligent execution. Plenty of our best succession results took a little longer than expected as we needed to fix a few fundamentals first!

But if the business is going well now, then succession is closer than most business owners realise. As always, it starts with a plan.

Looking ahead, it is hard to see an end to this wave of activity. It could go on for years and years.

Yep…that’s what we all thought in 1987, in 1990 and in 2007.