Corporate Finance in Atlantic Canada

Commentary on corporate finance issues for small- & mid-market private companies in Atlantic Canada

Posts Tagged ‘selling your business

Selling your small business during the pandemic

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https://www.cnbc.com/2020/05/14/how-to-sell-your-business-and-retire-during-coronavirus-pandemic.html

At the link above is an interesting CNBC op-ed about selling your small business during the coronavirus pandemic.  While the statistics quoted are US, there are strong similarities with the Canadian small business market.  For example, while the average small business owner is 60 years, we believe that is higher in Atlantic Canada due to the demographics in our region (see my earlier posts about the last census).

“Many business owners who want to cash out and retire are worried they won’t be able to do that for years because of Covid-19. Nothing could be further from the truth. Investors with capital are always looking for opportunity, no matter what is happening in the market.”

There are certainly plenty of buyers in Atlantic, and they have access to debt & equity capital.  While many paused at the outset, we’ve seen transactions close in Atlantic Canada during this pandemic.  We also agree with the article that there will be many business owners who will want to sell once the economy re-opens.  There is some expectation of slightly lower valuations (due to the uncertainty of the economy), but we’ve seen some evidence that any declines will not approach that of the public market declines in March (where most industry multiples were down at least 30%, although significantly improved since then).

Some good points in this article about exit planning steps to take coming out of the pandemic:

  1. Understand your goals (such as desire for retirement) and what they mean for your business.
  2. Clean up your financials (identify normalizing adjustments, etc).
  3. Mitigate the risk factors that could prevent a sale (such as resolving outstanding litigation that could mean a buyer won’t acquire shares).
  4. “Battle-test” your operations (prove that your staff and management team can run the business without you there every day — this will improve the value of your small business).

One of the themes of this blog — there are plenty of buyers and capital to fund them — still holds true as we come out of this lockdown due to the covid-19 pandemic.

Written by Dan Jennings

June 2, 2020 at 10:22 am

Kefi Travel acquires Canadvac Travel

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https://huddle.today/kefi-travel-acquires-canadvac-travel-services/

NB news service Huddle published a news release today about Saint John, NB’s Kefi Travel acquiring Chester, NS-based Canadvac Travel.

Canadvac is a receptive (i.e. inbound) tour operator focused on European visitors to Canada, while Kefi is a personalized/customized travel operator. 

Written by Dan Jennings

March 8, 2020 at 7:10 pm

Canada’s Wave of Business Transition

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Readers of my blog (and LinkedIn posts and if you’ve attended one of my Bidding War sessions) know that while there have been plenty of small & medium-size business sales in recent years, there are many more to come.  It is a matter of demographics … 20% of Atlantic Canada’s population is already over the age of 65, and most of the children of those that are business owners don’t want the business (in my experience) … so, the reality is that many business owners are going to sell, even if some have been putting off the decision.

Our firm BDO recently partnered with FEI Canada for a survey of business owners about their succession plans.  While the findings may not be new to some of us, they are further corroboration of the above demographic reality.

  • 54% are expecting to sell within 2 years;
  • 19% are expecting to sell within 3-5 years;
  • 83% have less than $100mil in annual revenue.

https://www.feicanada.org/ajaxfilemanager/uploaded/SELLING_BUS_SURVEY_EN%20(002).pdf

Written by Dan Jennings

December 24, 2019 at 11:21 am

Acadian Maple sold

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https://www.thechronicleherald.ca/business/local-business/authentic-seacoast-acquires-acadian-maple-345788/

The Chronicle Herald is reporting that Authentic Seacoast has acquired Acadian Maple Products from the Allaway family.

Acadian Maple is a Halifax-based supplier of maple products, including its popular-with-bus-tours Tantallon retail location.

Authentic Seacoast is a Guysborough-based collection of businesses owned by Glynn Williams.  Williams is well reported as the Toronto businessman who fell in love with Guysborough and has been active in building food & beverage businesses in the town. http://authenticseacoast.com/meet-glynn/

Written by Dan Jennings

August 28, 2019 at 12:05 pm

Different types of buyers

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In general, there are 3 groups/types of buyers for mid-market private businesses:

  1. Strategic.  Such buyers are often called industry buyers because they are typically in the same (or related) industry as the target.  These buyers tend to be larger companies seeking to consolidate your business with their existing operation, and so, they often have access to synergies from combining the two businesses.  These synergies can mean that such buyers can afford to pay more than the below types of buyers (i.e. they can pay a strategic premium over/above standalone financial value).  These buyers are often an option for mid-market businesses and less so for small businesses, but that can depend on the industry.
  2. Financial.  Financial buyers are aplenty in the Atlantic marketplace, given the prevalence of debt and equity capital.  These buyers have access to capital and either financial or management expertise, but aren’t currently operating in the industry of the target (and therefore don’t have synergies to allow them to pay the above premium price).  Such buyers range from formal private equity funds (such as the Sobeys/McCain-founded SeaFort Capital), to informal groups of owners seeking to invest in businesses and their management teams, to individuals who have a dream of being an owner (and have never acquired a business before).  In today’s market, there are many more financial buyers than business opportunities, and so these buyers/investors are looking in almost all industries and sizes in Atlantic.
  3. Management.  Existing employee or senior management groups have always been an option to acquire your business.  Historically, the challenge was often that such buyers didn’t have capital, and so often required significant vendor financing assistance.  In recent years, that is no longer the case, due to the availability of capital (both debt and equity) to assist management teams in acquiring the businesses they work for.  While management buyers can’t do the above strategic price, they can pay a fair price and therefore are a credible alternative.

Stay tuned for more blog entries on each type of buyer.

Written by Dan Jennings

June 12, 2019 at 9:23 am

Cabco Communications sold

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https://www.thechronicleherald.ca/business/cabco-communications-sold-to-local-investors-307611/

The Chronicle Herald is reporting that Dartmouth, NS-based Cabco Communications Group has been sold to a group of local investors, led by Jim Mills (CEO of Halifax-based Office Interiors).  Cabco is a cabling & technology equipment sales, installation and service provider.

This is another example of the type of financial buyer I have spoken/written about many times.  In many sectors, private equity (or informal private equity in the form of a group of investors, in this case) has become a strong & credible alternative to ‘traditional’ industry/strategic acquirers.

Congratulations to majority owner Craig Meredith on his succession and exit!

Written by Dan Jennings

May 2, 2019 at 8:42 am

Conquest Engineering acquired

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https://www.thechronicleherald.ca/business/cbcl-acquires-conquest-engineering-265070/

The Chronicle Herald is reporting that Halifax-based CBCL Ltd has acquired Conquest Engineering Ltd of Saint John, NB.  As is common with many engineering firms, both are said to be employee-owned.

This continues the consolidation trend in the engineering industry.

Written by Dan Jennings

December 4, 2018 at 11:41 am

Edible Matters restaurant deal

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https://www.thechronicleherald.ca/business/local-restaurant-edible-matters-gobbled-up-248996/

The Chronicle Herald is reporting that the Hammond Plains restaurant/bar Edible Matters has been sold.  The Webber family sold to the Doherty family, which owns the Old Triangle bars throughout the Maritimes.

Written by Dan Jennings

November 23, 2018 at 2:13 pm

Business succession in NL

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https://soundcloud.com/vocm/sept-1st-greg-london-dan-jennings-of-bdo-valuing-your

On a recent VOCM radio show in NL (hosted by BDO partner Nancy Snedden), tax colleague Greg London and I talk in-depth about the challenges of business succession in NL.  We covered a wide variety of topics, such as demographics, taxes, the buyer landscape and more.

Written by Dan Jennings

October 26, 2018 at 1:34 pm

More insurance broker consolidation

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http://thechronicleherald.ca/business/1558403-long-standing-independent-brokerages-merge

The Chronicle Herald is reporting that Antigonish Insurance and AA Munro Insurance (both Antigonish, NS-based insurance brokers) are merging.

This continues the consolidation trend in the P&C insurance brokerage industry.

Written by Dan Jennings

April 3, 2018 at 9:15 am