Buying a school bus contractor in Canada

Someone evaluating a school bus contractor is looking at a business whose customers are public bodies, whose workforce is licensed to carry children and whose main asset is a set of agreements with an end date. Features to look for include routes with time left, drivers who stay, a clean carrier record and buses that are maintained rather than patched. What is harder to see is what the seller has not volunteered. This guide covers what a good contractor looks like, what to ask that the seller may not raise, and what you personally need before you can run the routes. It is written for a first-time or experienced buyer alike.

What a good contractor looks like

Look for agreements with meaningful time remaining and wording that lets a new owner step in, a driver roster that does not depend on a few individuals, and a carrier record you can verify. In Ontario, the ministry’s CVOR abstract summarizes collisions, convictions and inspections, and the carrier safety rating is public. Look for a fleet with maintenance records for every unit. If reported earnings look strong while the records are thin, ask why.

What you must qualify for

Ask what you will need in your own name. The company may need a carrier registration, and Ontario’s CVOR page says that if you operate a commercial vehicle in Ontario you must have a valid CVOR certificate, subject to the exceptions it lists, and lists notifying the ministry immediately of changes such as corporate officers. If you will drive routes yourself, the MTO bus handbook sets conditions for a class B or E licence, including a ministry-approved school-bus driver improvement course. Contracting bodies may also set their own conditions for contractors. Ask each one, in writing, what it requires of a new owner, and do not rely on the seller’s account of it. Keep the replies with your deal file, since you may need to show a lender or your lawyer exactly what each body said and when.

What a seller may not volunteer

Ask which agreements are close to their end and whether any renewal has been discussed. Ask whether the contracting body has raised any complaint, audit or intervention, whether any driver’s credentials are due to lapse, and whether any bus is nearing the end of its useful life. Ask whether reported maintenance matches what the records show. Ask how many routes are covered by drivers who are not on the regular roster, since that can mean routes depend on the owner’s own driving, which leaves with the owner.

Structure and consent

Whether you buy assets or shares decides what carries over and what needs consent. Read each agreement’s assignment and change-of-control wording (see change-of-control clause). In an asset purchase, ask whether each contracting party must agree and whether it may instead put the routes out for tender. In a share purchase, you take the company’s history with it, including its safety record and any past liability, so the diligence work is heavier. Decide the structure with a lawyer before price is fixed.

Reading the financial statements

Compare the reported earnings with the agreements and the fleet. Revenue that is tied to routes should line up with the agreements you are shown, and spending on repairs, fuel and driver pay should line up with the records. Ask how the owner is paid and whether any family members are on the payroll at rates that a buyer would have to change. Ask for the statements and tax returns for several years, so that you can see how the business behaved when an agreement was renewed, re-tendered or lost. Have an accountant review them before you rely on the seller’s summary.

The first year of ownership

Plan for the first year before you sign. Ask who will manage dispatch, who will handle driver scheduling when someone is sick, and who will deal with the contracting bodies. If the seller has done these jobs personally, you need a replacement or a transition period written into the sale. Check what insurance, carrier registrations and licences must be changed into your name or the company’s on closing. Build your own list of dates for renewals, certificate expiries and inspections, so that the first year does not depend on remembering what the seller used to do.

• Which agreements run past the next tender, and who must consent to your ownership?
• Can you show, from the carrier record, that safety performance is acceptable?
• Which drivers are on the roster, and what credentials does each hold today?
• Which buses need replacement soon, and has the seller priced that in?
• Does any route depend on the seller personally driving or managing?