Selling a pool installation and service company in Canada

An owner who has decided to sell a pool company faces a particular timing problem. If the business earns most of its money in a short season, it helps to have a full cycle of openings, installations and closings clear in the records. Preparation is mostly about making those records clear enough to test. This guide covers the order of work, what a buyer’s advisers will ask for, how customer information may be shared, and how to keep the sale quiet while people who depend on the company are watching. It does not suggest a price or a timeline, and it does not suggest whether any particular owner should sell.

Start with the books and the advisers

BDC’s guidance on selling a business names an accountant and a lawyer familiar with business transitions among the team of advisers for a sale. The accountant helps prepare year-end and interim statements and projections, which BDC says buyers typically ask to see as part of due diligence, and can help structure the transaction to minimize tax liability from the sale. For this sub-sector, ask the accountant to report installation and service results separately, and to show how customer deposits are treated. Results shown separately let a buyer’s advisers test each part.

Document the backlog and the service book

Prepare a backlog schedule: every signed installation, its price, the deposit held, the scheduled start and the work already done. Match it to the deposit balance on the books, because the two figures should agree. Then prepare the service book: which customers hold contracts, which season each began, which came from your own installations, and the route each is on. If service arrangements are verbal, consider writing them down before the sale process starts, since written terms are easier for a buyer’s advisers to test.

Gather the sign-offs and qualifications

Be ready to show who performs electrical and gas work on pool equipment and what documentation shows it was done properly. In Ontario, the Electrical Safety Authority states that only electrical contractors it licenses may do electrical work for hire. Pull together whatever permits, inspection records and sign-offs exist for past installations, and the licence details of any subcontracted electricians and gas technicians. Licensing can differ by province, so confirm with the relevant regulator what applies where the company actually works.

Share customer information carefully

A customer list names real people, and sharing it with a prospective buyer is a privacy question. Under the federal Personal Information Protection and Electronic Documents Act (PIPEDA), section 7.2 applies in addition to the circumstances in section 7, and allows organizations that are parties to a prospective business transaction to use and disclose personal information without the individual’s knowledge or consent if conditions are met. They include an agreement requiring the receiving organization to use the information solely for purposes related to the transaction, to protect it by security safeguards appropriate to its sensitivity, and to return or destroy it within a reasonable time if the transaction does not proceed, and that the information is necessary to determine whether to proceed and, if the decision is to proceed, to complete it. Section 7.2(4) says this does not apply to a transaction 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, section 18.4, has its own conditions, including an agreement entered into first. Ask your lawyer before releasing names, addresses or payment details.

Keep the sale confidential

BDC warns that, depending on a listing site’s confidentiality procedures, word of a sale could reach employees, customers or suppliers. Ask any prospective buyer to sign a confidentiality agreement before receiving identifying details. Release customer-level data only late in the process, and only to buyers who have shown they can finance the purchase.

Think about structure and your role afterward

BDC says a 100%-cash-out deal puts more risk on the buyer because the seller is no longer involved, and that buyers may insist on a reduced price if the seller cuts all ties. It also lists vendor financing, an earn-out and a phased transfer as ways a seller stays involved. Ask whether a handover period would help customers meet the new owner. The Canada Revenue Agency publishes form GST44, which it says is used to elect to not have GST/HST apply to the sale of a business or part of a business. Whether it applies is a question for your accountant, as is the choice between an asset sale and a share sale.

• Installation and service results reported separately for each recent season
• A backlog schedule that reconciles to the deposit balance on the books
• The service book, with contract start dates and routes
• Permits, inspection records and sign-offs for electrical and gas work, plus subcontractor licence details
• A confidentiality agreement and a plan for releasing customer data in stages