In 1978 Jeff Polovick started Grove Rentals & Leasing in a small service station in Spruce Grove, Alta. Thirty-two years later, the company, now called Driving Force, had grown into one of Western Canada's largest vehicle suppliers, with more than 200 people working in 10 locations.
And Mr. Polovick, its founder and president, was turning 60.
At the time, he didn't want to retire. "I refuse to use the 'R' word because it's something I'll never do," he says, reflecting. But he did want time away from the job he'd lived and breathed for so many years.
Mr. Polovick's two children made it clear they didn't want to take over. "Both of them have worked in the business part time, and neither of them felt that this is what they wanted to do," he says.
He faced a dilemma that confronts scores of business owners from the baby boom generation. As the financial crisis fades and the market for buying and selling businesses rebounds, they're contemplating retirement. So, what to do?
Many families put off making major decisions about their businesses during the recession, says Anthony Sigel, president of Kilmer Capital, a private equity firm that generally invests in companies with revenue of at least $50-million.
Now, he says, many families are looking to sell. "When it comes time to sell it's a quasi-emotional, quasi-logical decision. Often there aren't kids that want to come into the business."
If the next generation doesn't want to take the helm – they're too young, for instance, or don't have the skills, or don't get along – parents have two options: find someone internally, such as one or more senior managers, to take over the business, or sell the company externally to a third party.
Either way, experts say it's a good time to explore both paths.
"The capital is back in the marketplace. The banks are all aggressively trying to invest in businesses through supporting acquisitions," says Steve Somerville, chief executive officer of BMO Capital Corp.
Meanwhile, private equity players the world over have hundreds of millions of dollars they need to invest quickly. "When we have a really good company that we take to market there's an awful lot of interest in it, and that would suggest that there's some supply-demand imbalance," Mr. Somerville says.
James Wong, vice-president of succession planning at Bank of Montreal, says he is seeing a greater number of business owners who are looking to sell or hand off their business these days.
"You speak to bankers and they're a little bit more hungry to lend money out there because they know the economy's stronger," he says. "So we're seeing these small and mid-sized businesses with enterprise values of $5-million or thereabouts now being targeted.
"And quite often the calls that I'm getting for help are from families that were planning or contemplating things, and the proverbial knock on the door happens when a competitor says, 'You know, Mr. Smith, we've been looking at your business a long time and we know that you're of the age where you might be retiring. Would you entertain a discussion?' And a lot of them say 'Sure.'"
Entrepreneurs contemplating selling first must ensure their company has recovered from the economic downturn, Mr. Somerville says.
"You can't sell a company based on two months of good results despite being in a down cycle for 36 months," he says.
Mr. Wong's tip is to plan early. Owners should move to mitigate taxes at least two years before the business is sold, he says.
"A lot of people think their business is very saleable. They think, 'I'm making money, why wouldn't someone buy my business?' But, depending on what industry it's in, it could be challenging.
"Quite often a lot of these business owners have held the company shares in their names only, not even in their spouse's, and when they go to sell the company they are then only entitled to one gain at the capital gains exemption," he says.
Mr. Wong also recommends involving family in the planning. "In my 10 years doing this I've had two or three cases where at the eleventh hour mom and dad tell the kids they're selling the family business, and someone says, 'Why are you doing that? You didn't ask us – we wanted to buy the business.'"
In the end, Mr. Polovick decided to try a relatively unique approach. He sold half of the company to a private equity firm. He retained a chunk, and also brought in seven of the company's key managers as partners (they each put up their own money to buy shares). He's on a countdown to exit the business over a period of five years.
He describes the arrangement as a win-win-win. The management team has the opportunity to profit. "And the best part I like about the private equity firm is that it's a marriage that is destined to last somewhere between five and seven years," he says.
"So I think I have about 1,737 more days or something," he says.
Not that he's counting.