Prepared buyers use M&A to earn four times the profits in Canada’s SME transition wave
More than $300bn in SME revenues is set to change hands in Canada over the next five years, creating a one‑off acquisition window where prepared buyers can earn four times the profits of non‑acquirers.
BDC’s ‘The M&A Advantage for Canada’s Entrepreneurs’ reports that nearly 61 percent of Canadian SMEs are led by owners aged 50 or older, and about one in five expect to exit within five years.
Roughly one‑quarter of those exits could happen in the next 12 months.
At the same time, there are about 10 businesses looking to buy for every seven looking to sell, which keeps the balance of power with vendors even as a wave of transitions approaches.
The performance gap is stark.
Using matched firm data from 2010 to 2022, Statistics Canada finds that five years after a deal, SMEs that acquire report profits four times higher than comparable firms that do not acquire.
According to Statistics Canada, acquirers typically see profits dip in the year of the transaction because of financing, legal, advisory and integration costs, then recover the following year and climb above non‑acquirers over time.
Return on assets for acquirers takes about five years to return to its pre‑deal level relative to non‑acquirers, but Statistics Canada says acquiring firms still generate much higher absolute profits and tend to be more diversified.
Sector results show where acquisitions most clearly drive top‑line growth.
Statistics Canada reports that, five years post‑deal, revenues for acquiring SMEs are about 1.7 times higher than non‑acquirers in wholesale trade, 1.8 times in manufacturing, 1.9 times in retail, and 2.2 times in education and health.
The strongest acquisition appetite sits in the mid‑market.
According to BDC, 15 percent of firms with 20–99 employees say they are very likely to pursue an acquisition in the next five years, compared with 9 percent of those with 1–19 employees and 7 percent of firms with 100+ staff.
Ambition matters: nearly 20 percent of companies targeting sales growth of 10 percent or more say they are very likely to buy another business, versus just 4 percent with growth targets of 5 percent or less.
On the supply side, deal quality looks relatively strong.
BDC notes that sellers planning to sell rather than close tend to have higher revenues, larger teams, faster sales growth, more ambitious performance targets and stronger profitability.
Succession preferences skew domestic: BDC reports that 83 percent of sellers expect to transition to employees, partners, relatives or Canadian buyers, with only 5 percent expecting to sell to foreign buyers.
Perceived M&A risk is often anchored in big‑ticket public deals.
Some studies cited by BDC suggest that 60 percent to 80 percent of acquisitions fail to meet objectives, but those figures generally come from large, complex, public transactions.
Research referenced by BDC indicates that SME deals differ: they usually involve smaller, less complex targets; lower deal sizes that reduce financial risk; and closer alignment between owners and decision‑makers, which can tighten oversight and strategy.
Execution is where outcomes diverge.
The survey work shows that nearly half of serial buyers—those with more than one acquisition in the past 10 years—name increased profitability as the main benefit of buying another business, but most first‑time buyers are underprepared.
Only 5 percent of first‑time acquirers have taken at least one preparatory step, compared with 19 percent of experienced buyers.
Expectations also clash: buyers view negotiations as the main hurdle, while sellers worry more about finding the right successor.
BDC’s survey reports that experienced acquirers expect the transition to take over a year longer than sellers think it will.
According to BDC, seasoned SME acquirers tend to do a few things consistently:
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they retain legal, financial and operational specialists
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run disciplined due diligence; dedicate internal resources to managing the transaction
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spell out the “why” and the expected synergies for their teams
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build a Target Operating Model and detailed integration plan
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track post‑deal performance against clear KPIs
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use credible leaders from both businesses to manage communications and culture.
Two recent SME examples show how this can translate into numbers.
In Quebec, IT services firm Rhesus lifted its annual growth to 40 percent after acquiring Sherbrooke‑based Québécom, according to BDC.
Vice‑President and General Manager Vicky Beaudoin says the company’s annual growth “is typically around 13 to 15 percent because we always hire some new talent.”
With the acquisition, however, “we got 12 experts all at once who were already busy with their clients,” and by combining the two teams, “we’re able to go after more business.”
Rhesus avoided layoffs, invested heavily in a year‑long alignment process, saved two accounting salaries by absorbing work into the combined team, secured better supplier terms on higher volume, and opened new manufacturing markets, including through a new office in Mirabel.
In Newfoundland and Labrador, telephone answering service Telelink effectively doubled its size after buying Big Sky Call Centers in 2022.
Co‑CEOs and partners Sydney Ryan and Cindy Roma grew the business from 12 to 150 employees, with many now working out of the former Big Sky office in Calgary.
Roma says, “We wanted to acquire a business in Alberta to serve those customers and grow that business.”
They left Big Sky largely intact for six months to learn its operations, then slowly centralized processes, migrated “knowledge in people’s heads” into systems and rebuilt trust with staff and customers.
Ryan and Roma say they earned less in the first couple of years than they could have, but report that 2024 was their strongest year yet for revenue and profit, with clients rising from 500 to over 1,000 and a more robust, consolidated service model.
Roma adds, “We’ve definitely increased our footprint. We’ve earned business we otherwise would not have. Having a physical presence has made a big difference.”
