Buying a HVAC contractor in Canada

A purchase agreement may not be enough on its own to run a heating and cooling contractor. Some of what the work depends on, such as certificates of qualification and licences, is issued to individuals or, as TSSA says of its licences, must be applied for again by the new owner. So the first question for a buyer is not the price. It is what you personally must hold, hire or apply for to operate the business lawfully on the first day, and whether you can do that on the timeline the deal assumes. Only then is it worth studying the maintenance book, the team and the equipment. This guide covers what a sound contractor looks like, what a seller may not volunteer, and what a buyer must qualify for.

What a sound contractor looks like

Look for evidence rather than assertions. A sound contractor can show maintenance agreements by customer with renewal dates, and service records that match the agreements. The work should not hang on one person: more than one technician should be able to handle each type of job, and more than one person should hold each key credential. The vans and diagnostic equipment should have a replacement history, not a surprise. Compare the split between installation and service in the records with what the seller says, and ask how much of each depends on the owner. A seller who can answer these questions quickly has shown the records exist. One who cannot has told you where to look.

What a seller may not mention

Ask directly about the things an owner might not think to raise. Which large customers deal only with the owner? Have any maintenance customers cancelled or gone quiet since the sale was contemplated? Which technicians have said they might leave? Are any recent installations still generating callbacks or warranty claims? Is an owner or relative being paid, or not paid, in a way that will change after the sale? These are questions to put in writing and to test against the records, not accusations. Pair them with a call to a few customers, if the seller will agree, once a letter of intent is signed.

What you must qualify for personally

Map the permissions before you commit. Skilled Trades Ontario issues certificates of qualification to journeypersons and distinguishes compulsory from non-compulsory trades, so find out which of the technicians’ trades apply and who holds the certificate. TSSA, Ontario’s technical safety authority, says licences are not transferable and the new owner must apply for a new one, and that contractors working on fuel oil equipment must be registered. In Quebec, the Régie du bâtiment du Québec publishes a page on which work requires a licence and a repertory of licence holders. If the contractor also does electrical work in Ontario, the Electrical Safety Authority licenses electrical contractors and says only contractors it licenses may do electrical work for hire there. Ask each regulator what a change of owner requires.

Dealer, insurer and association relationships

Other relationships may need your own approval. A manufacturer dealer or preferred-contractor arrangement may have its own conditions for a new owner, so read it and ask the manufacturer what it requires. Ask the insurer early whether the existing coverage can continue after a change of ownership. HRAI says its contractor members must maintain insurance coverage and valid trade certificates and licences, so if the contractor is a member, ask what membership requires of the new owner. None of these is a reason to walk away. Each is a condition to build into the timetable.

Test the owner’s role honestly

Decide what the owner actually does: estimating, selling, holding the biggest accounts, dispatching, or being the certified technician of record. Then decide whether you can replace each function, by hiring or by doing it yourself. If you cannot do the technical work yourself, ask who on the team will, and whether they will stay. Ask for a transition period in the agreement and consider tying part of the price to retention of customers or technicians. The glossary entries on key person risk and earn-out explain two tools for this problem.

• Which licences, registrations and certificates does the business rely on, and which must you apply for in your own name?
• Which technicians hold the key credentials, and will they sign on for the transition?
• Which large customers does the owner personally hold?
• Are the maintenance agreements assignable, and do the manufacturer arrangements need consent?
• Does the current insurance continue under new ownership?