Succession plans up in the air

Six in 10 private companies in Canada will change ownership structures within the next 10 years but very few (11%) have a succession plan in place, according to executive CAs responding to a CICA/RBC Business Monitor Survey. An additional 17% have at least started work on a succession plan but the large majority have done nothing more than discuss it. Given the time it takes to prepare for succession, this is a topic that should dominate the agendas of private companies in the near future.

The survey, conducted in the first quarter of 2010, also found that the recent economic downturn is not expected to impact succession plans for the large majority (69%) of respondents. Only 20% expect it to delay plans and 6% indicate it will accelerate them. (The remaining 4% didn’t know if it would have an impact.)

Although most companies had not formally started on succession plans, they have given thought to the likely succession option they will pursue and the challenges they expect to face. Selling to another business or a third party (35%) was the most frequently selected succession option, followed by transfer/pass ownership to family members (25%). More than one in 10 (14%) don’t know what option would likely be pursued; 7% expect to sell to management or employees and 6% expect to sell to a partner or partners. Only 4% expect to go public.

John Tabone is CICA’s manager of member value and research services