A new report has found that more business owners are turning to mergers and acquisitions through the pandemic recovery as a way to address the ongoing labour shortage.
According to a BDC study released on Tuesday, 30 per cent of business owners say the top factor motivating the pursuit of an acquisition is getting access to new talent, up from 20 per cent before the COVID-19 pandemic struck. Acquiring new technologies is cited as the second top factor, with 25 per cent of entrepreneurs citing it as an important motivation, up from 14 per cent pre-pandemic.
This comes as one in four Canadian businesses looking to sell or close their business within the next five years.
Many businesses in Canada are struggling to retain and recruit workers amid the ongoing labour shortage. According to a BDC report released in September, 55 per cent of entrepreneurs are having difficulty hiring workers and have been unable to fill jobs for three to four months. Another 26 per cent are having difficulty retaining workers, resulting in a situation that could threaten Canada’s economic growth prospects.
Like other economists, I have been wondering what effects the pandemic, and the resulting recession, has had on the mergers and acquisitions (M&A) market among Canadian small and medium-sized enterprises (SMEs). To find out, BDC consulted with experts, interviewed entrepreneurs who had made acquisitions, and surveyed more than 1,500 SME leaders,” said Pierre Cléroux, Vice President, Research and Chief Economist, BDC.
“We found that this market rebounded quickly when the lockdown measures were lifted and that the outlook for the next five years is very positive. Could economic recovery and business growth benefit from this upward trend? We also found that entrepreneurs who choose to grow through acquisition are twice as likely to experience sales growth above their industry average than those who grow organically. This is true regardless of the size, age, industry, region, or level of internationalization of the company,” he said.
“The motivations for buying a business have also changed since 2020. Acquiring new talent and the desire to invest more in technologies, for example, have become much more important than they were before the pandemic. In addition, we found that there is no need to fear foreign takeovers of Canadian businesses. Between 2016 and 2020, the number of Canadian SMEs that bought foreign companies
was almost double the number of foreign firms that bought Canadian SMEs. Finally, this study highlights a number of good business practices to implement during a merger or acquisition.”