Buying an excavation and earthworks contractor in Canada

Someone evaluating an excavation business is buying machines, a crew, and a position with the contractors and developers who send the work. The company can look healthy on the financial statements and still be a poor purchase if its value rests on one owner’s relationships or on a fleet about to need replacing. Before the numbers, there is a question of your own: whether you can lawfully run what you are buying. This guide covers what a sound earthworks company looks like, the points a seller may not raise, and the qualifications you will have to meet yourself.

What a sound company looks like

Look for a fleet whose age is spread out instead of concentrated, so that replacement can be planned, and for maintenance records that match the hours on the machines. Look for work that comes from several general contractors or developers rather than one, and for operators who have been with the company long enough to know the equipment. A second person who can estimate and run the schedule shows that the business does not stop when the owner is away. Ask for the history behind each of these, not the summary.

What the seller may not volunteer

Ask directly about machines nearing end of life, about verbal arrangements with customers that are not in any contract, and about sites where soil was moved and disposal was informal. Ask who owns each machine and each truck, since some equipment may sit in a separate company. Ask whether any customer has said it will review its supplier list after a sale. Ask about utility strikes and near misses, including ones that never produced a claim. A seller who answers openly is giving you information that a document request alone may not.

Your own qualifications come first

Operating the trucks means meeting your province’s commercial vehicle rules. Transport Canada says those rules rest on the National Safety Code standards, which range from commercial driver licence requirements to carrier facility audits, and that provincial and territorial regulations govern the commercial truck industry, apart from the rules it sets for federally regulated (extra-provincial) carriers. Alberta, for example, requires a Safety Fitness Certificate for carriers who own certain commercial vehicles and says a change in operating status may require compliance with different requirements. Transport Canada adds that its Motor Carrier Safety Fitness Certificate Regulations require federally regulated truck and bus carriers crossing provincial or international borders to obtain a safety fitness certificate before they may operate on Canadian highways, so ask whether the company’s trucks ever leave the province. Alberta publishes criteria for deciding whether a carrier falls under federal or provincial rules for its certificate. Check what your province asks of a new owner, and whether you or a manager you hire will hold the required credentials.

Quebec is a different regime

If the company works in Quebec, ask whether its work falls under the Régie du bâtiment du Québec’s licensing rules. The RBQ publishes pages on work requiring a licence, licence classes and subclasses, licence security and change of legal status, and offers a repertory for checking a contractor’s licence number. Whether a share purchase or an asset purchase changes what the licence holder must do is a question for a Quebec lawyer, and the answer can alter how the deal is structured.

Insurance and bonding are conditions, not details

Ask your insurer whether it will cover the operation on the same terms once you own it, and what it wants to see about the loss history. If the company bids on work that requires bonding, ask the surety company what it will need from a new owner. Neither can be assumed to carry over. Get these answers in writing before you waive conditions, because a business that cannot be insured or bonded for the work it currently does has lost some of what you are buying.

Judge the people as well as the machines

An earthworks company runs on its operators, mechanics and the person who schedules the jobs. Ask who the key operators are, how long each has been there, and whether any of them is likely to leave when ownership changes. Ask whether the operators hold the tickets or licences the work needs, and who trains new hires. Meet them before you close, if the seller agrees. Ask what it would take to replace the people, not only the machines.

• Fleet age and condition by unit, set against what you would have to spend over the next several years
• Share of revenue from each general contractor or developer and whether the relationship is written or personal
• Whether you meet your province’s commercial carrier and driver requirements, or who will
• Written confirmation from your insurer and any surety about coverage after the sale
• Where the soil from past jobs went and who accepted it