{"id":8446,"date":"2025-10-30T15:00:53","date_gmt":"2025-10-30T19:00:53","guid":{"rendered":"https:\/\/www.ec2finance.com\/?p=8446"},"modified":"2025-11-06T13:20:25","modified_gmt":"2025-11-06T18:20:25","slug":"management-buyout-family-transfer-how-to-succeed-with-internal-succession","status":"publish","type":"post","link":"https:\/\/www.ec2finance.com\/en\/management-buyout-family-transfer-how-to-succeed-with-internal-succession\/","title":{"rendered":"Management Buyout, Family Transfer: How to Succeed with Internal Succession"},"content":{"rendered":"

As an entire generation of business leaders prepares to pass the torch, internal succession is emerging as a promising\u2014yet often underestimated\u2014path. According to Repreneuriat Qu\u00e9bec, about 50% of Quebec businesses expected to change hands in the coming years will do so within the family or among key employees. With a more flexible tax environment and new support tools, this option is gaining relevance\u2014provided it is well planned.<\/p>\n

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Plan Ahead to Ensure a Smooth Transition<\/strong><\/h3>\n

Many business owners want to prepare for succession but hesitate to discuss it openly. Fears of offending children or employees, concerns about not finding a buyer, or a lack of understanding of the process often slow down these efforts. Yet, a well-planned transition can be a positive experience for everyone involved.<\/p>\n

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\u201cThe key is preparation,\u201d emphasizes Louis Blain CPA, M&A and Corporate Finance Partner at EC2 and creator of the Au c\u0153ur de la rel\u00e8ve program. According to him, it takes at least three to five years to structure a solid succession plan, as he explains in episode 35 of the Au c\u0153ur de l\u2019action podcast, hosted by EC2 Finance<\/a>. His program, made up of seven modules, helps future successors understand the financial, legal, and human aspects of a transaction, while allowing owners to gauge the real interest of their children or managers. \u201cSome owners enroll their employees in the program simply to see if the entrepreneurial spark is there,\u201d he notes.<\/p>\n

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Challenges abound: lack of motivated successors, complex financing, rising interest rates, and rapid changes in the business world (artificial intelligence, cybersecurity, etc.). But the benefits of internal succession are considerable: continuity of values, team stability, and maintaining Quebec interests in the company\u2019s capital.<\/p>\n

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Train Successors Before Naming Them<\/strong><\/h3>\n

The program developed by Louis Blain illustrates this philosophy well. Each module covers a step in the process: business valuation, financing, legal issues, negotiation, taxation, transition planning, and above all, the human dimension. \u201cWe don\u2019t want to lose strategic employees,\u201d he reminds us. \u201cA successful transaction is one that preserves talent and organizational culture.\u201d<\/p>\n

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The expert also warns against several pitfalls: paternalistic decision-making, poor communication, and the absence of shareholder agreements\u2014even among family members. \u201cA father could inadvertently end up partnered with his son\u2019s spouse in the event of death if nothing is specified in the will,\u201d he illustrates. These often-overlooked aspects are essential to project stability.<\/p>\n

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Management Buyout: A Lever for Continuity and Motivation<\/strong><\/h3>\n

In another episode of the Au c\u0153ur de l\u2019action podcast, Wandrille Lef\u00e8vre CPA, M&A and Corporate Finance Partner at EC2, explores management buyouts.<\/a> This approach appeals to SMEs seeking continuity while valuing key employees.<\/p>\n

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\u201cThis type of transaction reassures financial partners: the successors already know the company and its culture,\u201d explains Wandrille Lef\u00e8vre . It also helps preserve jobs and recognize the long-term commitment of certain collaborators. For the seller, it\u2019s a way to pass on their legacy to trusted individuals, sometimes remaining involved through a minority stake.<\/p>\n

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This was the choice of Michel Berne and St\u00e9phan Harris, co-founders of Ad hoc recherche, who transferred ownership to nine company managers. The sellers retained a block of shares, which facilitated the financial structure for the succession, as they explained in a Journal de Montr\u00e9al article.<\/a><\/p>\n

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Internal buyouts, however, come with their own set of challenges. First, the right candidates must be identified: managers with an entrepreneurial vision, able to take on risks and leadership. Then comes the question of financing: managers rarely have resources comparable to those of an external buyer. Using a vendor take-back or hybrid financing (including subordinated debt) is therefore common.<\/p>\n

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\u201cThe structure must be well designed so that everyone benefits,\u201d says Wandrille Lef\u00e8vre, who recommends comprehensive professional support\u2014tax advisor, accountant, lawyer, and financial planner\u2014to maximize advantages and reduce human tensions.<\/p>\n

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Intergenerational Transfer Facilitated by New Rules<\/strong><\/h3>\n

On January 1, 2024, a major change simplified business transfers within families. As explained by Marc-Andr\u00e9 Perreault, Partner and tax lawyer at De Grandpr\u00e9 Chait, in episode 31 of the EC2 Finance podcast,<\/a> new federal tax rules harmonized with those of Quebec correct a historic inequity: it is now just as advantageous to sell your business to your child as to a third party.<\/p>\n

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This new framework allows for the capital gains deduction (up to $1 250 000 per parent) during a family sale, provided specific criteria are met: the business must be active, the parent must relinquish factual control, and the successor child must remain involved for several years. Two options are available:<\/p>\n