Part 1 – The $2 Trillion Transition: Why Most Manufacturing Owners Aren’t Ready to Let Go

By Dale Tingley, Co-Managing Partner, CBGF

Across Canada, a generation of manufacturers is approaching the biggest transaction of their careers, and most aren’t prepared. Roughly 75% of Canadian small business owners plan to exit within a decade, transitioning more than $2 trillion in assets, yet less than 10% have a formal succession plan. For an industry built on precision, succession is the one process most owners leave to chance.

The reasons are understandable. Running a manufacturing business is a full-time job, and exit planning competes with labour, input costs, and trade uncertainty. But delay has a cost. Owners who wait often fall into an exit rather than plan one. We’ve seen this too often: an unsolicited offer catches a company off guard, and the owner, compelled to react, accepts it instead of the one that best protects their business, people, and legacy.

The problem isn’t finding a buyer; it’s deciding what problem you’re trying to solve

Owners identify two main obstacles in exit planning: finding a buyer and overcoming the mental barrier of selling a business tied to their identity. The second is often harder because the options presented are narrower than owners realize: three well-worn paths, all ending in an outright sale. A strategic acquirer may consolidate operations and move decision-making to a head office in another province or country. Traditional private equity typically buys a control stake (up to 100%), replaces management on its own schedule, and sells within three to five years to meet return targets. Family succession or a management buyout is what most owners want, but also the most likely to stall: the next generation may have different ambitions or skills, or lack the capital to buy in and keep investing for growth.

What’s often missing is a fourth path: patient minority capital that begins the transition and funds growth without a change of control. In our experience, many founders prefer a staged approach to an ‘all or nothing’ exit; they aren’t ready to give up control but grow more risk averse as they approach retirement. Minority equity lets owners take cash off the table, accelerate growth with an experienced investor, and build a succession and exit plan around their timing and financial objectives.

A different kind of transition

CBGF’s model was built to provide this alternative. As an evergreen fund backed by Canada’s leading banks and insurers, we target investments of $10 million to $20 million in mid-market Canadian businesses for a minority stake. Founders can invest in equipment, expand into new markets, or bring on the next generation of leadership while retaining ownership and decision-making authority.

This matters most in moments of transition. A founder nearing retirement or stepping back can transition leadership over time and avoid being tied to the business in a future sale. A family business can bridge the gap between what the next generation brings and what the business needs. A management buyout team gains a partner and the runway to build under its own leadership.

Ownership transition doesn’t have to mean giving up what you built. Done proactively, it lets you choose the terms on which your business, and your legacy, carry forward.

The window to plan is now, not later

With $2 trillion changing hands in the coming decade, companies that plan early will control the outcome far more than those who wait for circumstances to force their hand. If you’re considering a transition over the next five years, the conversation is worth having sooner rather than later. In Part 2, Hai Tran-Viet asks whether to invest through today’s uncertainty or wait it out.

Dale Tingley is Co-Managing Partner at CBGF, leading the Fund’s strategic direction and overseeing origination, execution, and portfolio management. With over 20 years in private equity, Dale has invested more than $800 million across 70+ companies, from early-stage ventures to large enterprises. He holds an MBA from Schulich School of Business and the ICD.D designation.

The Canadian Business Growth Fund provides long-term, patient, minority capital to ambitious entrepreneurs leading established Canadian mid-market businesses.

References

Canadian Federation of Independent Business (CFIB), “Over $2 Trillion in Business Assets Are at Stake as Majority of Small Business Owners Plan to Exit Their Business Over the Next Decade” (January 10, 2023): https://www.cfib-fcei.ca/en/media/over-2-trillion-in-business-assets-are-at-stake-as-majority-of-small-business-owners-plan-to-exit-their-business-over-the-next-decade