Selling a fire protection and sprinkler company in Canada

An owner who has decided to sell this kind of company has a different job from one still wondering about price. Prepare your inspection files, your contract list and your payroll records before anyone sees them. Begin well before you list if you can, so that this work is not being done while a buyer waits. The sequence below is one sensible order to work in.

Start with the records you will have to hand over

Pull every inspection and testing report for the systems you service and check them against your own schedule. Look for missed visits, reports without a technician’s name, deficiencies noted but never followed up and customers whose files are thin. Fix what can be fixed and write down what cannot. Where a gap cannot be fixed, disclose it with a plan for dealing with it, rather than leaving it to be found.

Plan for people and customers

In Ontario, Skilled Trades Ontario issues Certificates of Qualification to individuals, so be ready to say which staff will stay and what each is qualified to do. Decide in advance how you will talk to key technicians, and when. BDC notes that buyers may insist on a reduced price if the owner cuts all ties. Offer a defined transition period instead, and decide when each technician is told. Also decide how your largest service customers will hear the news. Plan who will tell each of them, and when.

Regulator, licence and workers’ compensation steps

Ask each regulator what changes when ownership changes. In Quebec, the Régie du bâtiment du Québec publishes pages on whether a licence is required, licence classes and subclasses, licence security and change of legal status. In Ontario, WSIB says that anyone selling or purchasing a business’s assets should get a purchase certificate, and that a closure request is still needed once the sale is completed. If you sell shares, WSIB says no new legal entity is created and no purchase certificate is required. Other provinces run their own boards and licensing bodies, so check yours.

Sequence the whole sale

Put the steps in order before you speak to anyone outside the company. First the records and the staff plan. Then a clean set of financial statements prepared with your accountant. Then a short written summary of the business that omits names. Only after that, speak to buyers or an intermediary, and meet them in stages. Brokers and advisors are partners in this, not obstacles, and ask yours which of these steps buyers in this sub-sector press on hardest.

Keep it confidential and organized

BDC notes that word of a sale could get out to employees, customers or suppliers, depending on a listing site’s confidentiality procedures. Use a confidentiality agreement before sharing the customer list, and release it in stages, with names withheld until a buyer is serious. Build a data room so documents arrive in a set order and nobody is hunting for them mid-negotiation. BDC suggests that a lawyer familiar with business transitions supplies information to buyers during due diligence and that an accountant prepares year-end and interim statements.

• Reconcile inspection and testing reports against your service schedule, and fix or explain every gap
• Write a one-page plan for each certified technician: role after the sale, retention conversation, backup
• List each service contract, its term, renewal date and any clause that restricts assignment
• Ask each regulator and your workers’ compensation board in writing what applies to an asset sale and to a share sale
• Prepare a staged disclosure plan so names and pricing stay private until a signed confidentiality agreement

What the buyer will ask for

Expect requests for historic and interim financial statements, projections and tax returns, which is the list BDC describes. Be ready, too, to produce contracts, insurance history, equipment lists and staff credentials. Ask your lawyer how your contracts and leases would move in an asset sale compared with a share sale, a point covered in do contracts and leases transfer in an asset purchase. Answer promptly and consistently, and keep a dated list of what you have handed over.

Before you speak to anyone, write down three lists. The first is every question you expect about the inspection records and how you would answer it. The second is every certified person, with what each holds and whether you have spoken to them. The third is every service contract with its renewal date. Ask your accountant and lawyer to read all three lists and tell you what is missing. Ask your broker or advisor, if you have one, what a buyer in this sub-sector has asked for in the past, and check that advice against the sources your advisors rely on. Keep the lists current while the sale is in progress so that every answer you give matches the last one.