Selling a flooring contractor in Canada

An owner who has decided to sell a flooring contractor faces a sequence of small jobs that, left late, can slow the whole sale. BDC says buyers will ask to look at your historic and interim financial statements, projections, tax returns and other records; in a flooring business, also prepare supplier agreements, customer and builder contracts, crew arrangements and the stock list. Several of those documents involve third parties whose reaction you do not control. The sensible order is to prepare your own records first, then find out where third-party consent is needed, and only then talk to buyers in earnest. Doing it in that order helps you avoid promising something a supplier will not honour. This guide follows that sequence for an owner who has already decided to sell, and it leaves the question of price to the valuation page. Read it alongside your lawyer’s advice on whether the sale is of assets or shares, since that choice changes several of the steps below.

Prepare your own records first

BDC says an accountant helps prepare year-end and interim financial statements, projections and other documents that buyers typically ask to see in due diligence, and that you will need a lawyer familiar with business transitions. It also advises documenting and updating standard operating procedures so operations transfer more easily to a new owner. In a flooring business that means written estimating methods, job files, warranty records and the crew schedule, so the business does not depend on what you carry in your head. BDC also warns that people underestimate how long it takes to prepare a business for sale, particularly if there are issues to fix, so start the records well before you list.

Find out what suppliers and builders will say

Check each supplier agreement for what happens on a change of ownership, and ask whether pricing tiers or rebates continue. Do the same with the builder and general-contractor agreements that bring in repeat work: read them for assignment and consent clauses before you promise a buyer anything. Keep a log of who has been told what and when, so that the story you give each party stays consistent. Decide with your lawyer when each counterparty is told, because telling a supplier affects confidentiality and the timing of closing. If a counterparty will not confirm, say so to the buyer and let the price or structure reflect it.

Handle customer information with care

A flooring contractor holds names, addresses and job histories. Under section 7.2 of PIPEDA, in addition to the circumstances in subsections 7(2) and (3), parties to a prospective business transaction may use and disclose personal information without the knowledge or consent of the individual if they have an agreement that requires the organization receiving it to use and disclose it solely for purposes related to the transaction, to protect it with security safeguards appropriate to its sensitivity and, if the transaction does not proceed, to return or destroy it within a reasonable time, and the information is necessary to determine whether to proceed with the transaction and, if it does, to complete it. Section 7.2(4) excludes transactions whose primary purpose or result is the purchase, sale or other acquisition or disposition, or lease, of personal information. Quebec’s private-sector privacy Act and other provincial laws may apply as well, so share only what the buyer needs at each stage.

Clear workers’ compensation and tax steps

In Ontario, the WSIB says that if you are selling or purchasing a business’s assets you should get a purchase certificate, that it may hold the purchaser liable for amounts the vendor owes if no valid certificate is obtained, and that the request must be made before the date of sale. A share sale does not need one, though the WSIB says you will need to submit the share purchase agreement. Other provinces run their own boards with their own rules, so ask your board. For tax, the CRA says you must close all your CRA program accounts if you sell or stop operating your business, and its GST44 form is used to elect that GST/HST not apply to the sale of a business or part of one. Section 167 of the Excise Tax Act limits that election to a buyer acquiring all or substantially all of the property needed to carry on the business, bars it where the seller is a registrant and the buyer is not, and lists in s.167(1.1) the supplies the election does not cover. Ask your accountant whether that election fits your deal.

Plan the handover of the owner’s own work

If the owner measures, quotes and keeps the builder relationships, be ready to show how those jobs move to someone else. BDC says that a seller who wants a smooth transition has a benefit in remaining involved afterward, for example through vendor financing, an earn-out, a phased transfer of ownership or a role as an executive, board member or advisor, and that buyers may insist on a reduced price if the seller cuts all ties. Decide what you are willing to offer before negotiating, and introduce the estimator, the lead installer and the office lead to key customers in a way that supports the sale without breaking confidentiality.

• Reviewed financial statements and a written recast of earnings with support for each adjustment
• Supplier agreements, rebate statements and the supplier’s written position on a change of owner
• Builder and general-contractor agreements, read for assignment and consent terms
• A crew list showing employees and subcontractors, with how each is engaged
• A WSIB purchase certificate request or the equivalent in your province, made before closing