Buying a fire protection and sprinkler company in Canada

In a fire protection company, ask whose name goes on each inspection report and what that person must hold to sign it. Before you look at financial statements, find out what the province requires of the person who runs the work and of the company that sells it. If you do not meet those requirements yourself, the deal has to be built around someone who does. Ask the regulator early rather than late.

Qualify yourself, or know who will

Trade qualification is provincial. In Ontario, Skilled Trades Ontario issues Certificates of Qualification to individuals qualified as journeypersons, issues credentials to apprentices, and treats compulsory and non-compulsory trades differently. In Quebec, the Régie du bâtiment du Québec licenses contractors and publishes pages on licence classes, subclasses and licence security. Ask each relevant body which credential covers sprinkler installation, which covers inspection and testing, and whether the company’s licence depends on a named individual. Then decide whether you will hold the credential, hire someone who does, or buy alongside a partner who does.

What a good one looks like

Ask whether the recurring service book depends on the owner’s personal relationships, how many certified staff there are beyond one or two people, whether records are ones a stranger can follow, and where installation work comes from. Ask to ride along on a service call and to meet technicians before closing, with the seller’s permission.

What the seller may not volunteer

Ask which customers are on handshake terms rather than written contracts, which technicians have said they might leave, and which inspection visits are overdue. Ask whether any customer has complained about a report, a missed visit or an invoice. Ask whether equipment such as test gear or service vehicles needs replacing soon. Put these questions directly and ask for the answers in writing.

Your first visit to the shop

Look at the shop and the vehicles as an owner would. Check how test gear is stored and whether calibration or service records sit with it. Ask to see how a job moves from a customer’s call to a signed report, and who reviews it before it leaves the building. Ask whether the process is written down or lives in the owner’s head. If you cannot get a plain answer to how a report is reviewed, treat that as a finding and raise it before price comes up.

Who else is buying

Ask a broker or the seller’s advisor whether other buyers are involved and what kind they are. Ask the seller what matters besides price, such as a transition period, what happens to staff, or how the company’s name is treated, and decide what you can offer on those points.

• Ask the provincial regulator which credentials the work and the company require, and who must hold them
• Find out which certified staff are willing to stay under new ownership, and speak to them before closing if the seller allows it
• Request a list of service customers on written contracts versus informal arrangements
• Ask where installation work comes from and whether any source would stay after an ownership change
• Check whether Ontario’s WSIB purchase certificate, or your province’s equivalent, is part of the closing steps

The deal structure changes what you inherit

WSIB explains that a purchase certificate verifies the seller has coverage and no outstanding debts when business assets are bought, and that when shares are sold no new legal entity is created, so no purchase certificate is required. WSIB also says it may hold the purchaser liable for all amounts the vendor owes up to the date of sale if the purchaser does not get a valid purchase certificate, and that the certificate must be requested before the date of sale. Ask a lawyer how the same choice between shares and assets changes what else you would inherit. The glossary entry on the asset purchase agreement explains the document that governs the second route.

Before you make an offer, write your own checklist of what must be true for the purchase to work. Include which credential you or a partner will hold, which technicians you need to keep, which customers you need to keep, and what you are willing to pay to replace test equipment. Then ask the seller and the regulator which of those items they can confirm in writing. Where an answer is only verbal, note who gave it and when. Take the checklist to your lawyer and accountant before you sign a letter of intent, and ask them which items should become conditions of closing. Revisit the checklist each time the seller gives you a new document, so that you are comparing the answers rather than collecting them.