Many Canadian family business owners are accelerating the handover of their companies under pressure from a changing economic landscape and internal family dynamics, according to a new study by KPMG LLP in Canada.

The survey of 285 leaders of 700 small- and medium-sized family businesses found that 79 per cent are speeding up their succession plans, with 73 per cent expecting to transition to new leadership within the next three to five years.

Most of them (79 per cent) are accelerating their succession plans for multiple reasons, including a constantly changing business and economic landscape, disruptive technologies, climate realities, tax changes and complex family dynamics.

“As a generation of family business founders and owners decide whether or not to step down as CEO, difficult decisions about what should happen to the business, next-generation readiness and how best to preserve family wealth and legacy all need to be carefully examined,” Yannick Archambault, partner, national leader, KPMG Family Office, said in a press release.

Seven in 10 leaders (71 per cent) already have a formal plan in place to ensure the continuity of their business, 19 per cent have a plan that isn’t detailed and six per cent don’t have a plan but say it’s understood who in the family will take over the business.

“Successful families that take a multidisciplinary approach to addressing emerging challenges and have been proactively preparing the business, their family and their successors will be in a better position to choose the optimal path forward,” Archambault said.

Many owners who are hoping to transfer their businesses within the family have established a timeline based on new tax legislation introduced in the 2023 federal budget, with 70 per cent putting their succession plans into effect before the new year to avoid incoming tax changes. The new rules set out more stringent requirements for the intergenerational transfer of shares of family-owned corporations and affect the ability of owners to claim a lifetime capital gains exemption.

“Family business owners who are contemplating passing on the business to their adult children or grandchildren may opt to do so before new tax rules take effect, but that window is closing very quickly,” Chris Gandhu, partner, KPMG Family Office leader for Calgary, said in the release.

Many owners (79 per cent) dream of transitioning their business to a younger generation within their family, while others (71 per cent) feel the next generation isn’t ready for the responsibilities and intend to sell to another company or third-party within three to five years (69 per cent).

“It’s not always feasible to pass the family business down to the next generation, and some may not wish to follow in their parents’ footsteps,” Archambault said.

He added that one way to keep control of the business in such circumstances is to hire a non-family member as chief executive and maintain family ownership.

But some owners (28 per cent) are struggling to find people willing to take over their business and plan to shut down in three to five years.

“Along with financial factors, inadequate succession and transition strategies are the single biggest factors in the failure of family businesses,” Archambault said. “Getting it right is critical.”

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Origin Energy Ltd.’s top investor rejected a revised A$19.1-billion (US$12.5-billion) takeover plan by a Brookfield Asset Management Ltd.-led group, casting the year-long pursuit into new doubt. Origin, Australia’s largest utility, should remain owned by AustralianSuper’s members and other investors, rather “than a private equity consortium planning to shortchange them,” the fund said. The energy company’s shares closed down 1.7 per cent at A$8.275, the lowest price since May 25. — Bloomberg

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Today’s Posthaste was written by Noella Ovid, with additional reporting from The Canadian Press, Thomson Reuters and Bloomberg.

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