Buying a pest control company in Canada

It is easy to ask about the revenue first when evaluating a pest control company. The better first question is whether you are allowed to run it. Ask what licensing the work requires in the province where the business operates, because some of what makes the business work may depend on credentials that belong to people rather than to the company. This guide is for someone weighing a purchase. It covers what a good one looks like, what a seller may not volunteer, and what you have to qualify for yourself before the numbers matter. Statements about licensing are framed as questions for your provincial regulator.

Check what you must hold yourself

Ask the provincial pesticide regulator what is required of the person or company that operates a pest control business, and whether you need a credential in your own name, or whether it is enough to employ people who hold one. Ask how long it takes to get and whether it can be held while a purchase is pending. Do this before you sign a letter of intent, and write down what you were told and by whom, so that the answer survives a change of staff at the regulator’s office. A purchase that depends on a credential you do not yet have is a purchase you cannot complete on the date you promised the seller.

What a good one looks like

Look for revenue that repeats, held by a roster of customers who have been serviced on a schedule for years, not months. Ask to see the account list with start dates and service frequency, and ask which accounts are under a written agreement and which are on a handshake. Compare the number of technicians with the number of stops they complete and ask who covers a sick day. If the owner is on the routes and will leave them after closing, budget for the wage of the person who replaces the owner.

What the seller may not volunteer

Some of what matters here may not appear in a sales package, so ask for it directly. Ask how many visits have to be repeated because a treatment did not hold, and what the company does about them. Ask whether any customer has made a complaint or a claim, whether the regulator has inspected the company or issued an order, and which technicians have given notice or talked about leaving. Ask whether any commercial customer requires records that the company does not currently keep. None of these is an accusation. Each is a gap you would otherwise inherit, and a seller who answers openly gives you something to rely on when you reach the price discussion.

The people come with the business, or they do not

Employment on a sale depends on the province. In British Columbia, the Employment Standards Act deems employment continuous and uninterrupted, for the purposes of that Act, when all or part of a business is disposed of, and the interpretive guide says the purchaser must treat employees as though their employment is continuous. In other provinces, ask your lawyer what an asset purchase does to existing employees. Then speak to the technicians the seller identifies as essential, with the seller’s permission, about what they hold and what they plan to do. A route without a technician who can service it is not a route you can use.

If there is a franchise banner

Where the business operates under a franchise, read the franchise agreement before the financials. Ask whether the franchisor must approve you as the buyer, what it charges for a transfer, and what you would owe it each month. Ontario’s Wishart Act and British Columbia’s Franchises Act both require a franchisor to give a prospective franchisee a disclosure document at least 14 days before the earlier of the events listed in section 5(1) of each Act. Each section also lists grants it does not apply to, including certain grants of a franchise by a franchisee for its own account and not effected by or through the franchisor (Ontario s.5(7), British Columbia s.5(8)), so whether it applies when you buy an existing franchisee’s unit is a question for a franchise lawyer.

Have the price and structure settled before you apply for money

BDC says that before applying for acquisition financing you and the seller must agree on a purchase price, and its application checklist asks for a clear transaction structure, either an asset purchase or a share purchase, a letter of intent and an expected closing date. BDC notes that a financing structure may combine your own investment, a business loan and seller financing. Work out early whether you are buying assets or shares, because that choice changes what you take on. See the glossary entry on the asset purchase agreement.

• The regulator’s written answer on what you personally must hold and how long it takes to obtain
• An account list with start dates, service frequency and written agreements shown against handshake accounts
• Technician names, tenure and credentials, with the seller’s agreement to talk to the essential ones
• The franchise agreement, if any, and the franchisor’s position on approving you as buyer
• Complaint, claim and regulator-inspection history for the last several years, as the seller can document it