Selling a proptech software company in Canada

An owner who has decided to sell a proptech software company may be selling something that depends on permissions other organizations control. The customers are brokerages and property managers, the data may arrive under a board’s licence, and the product may record money that belongs to someone else’s clients. The order in which an owner deals with those things decides how smooth the sale is. This guide follows that order, from private preparation to the mechanics of closing, and leaves pricing to the guide on what a proptech software company is worth. Business brokers who handle technology sales are partners in a sale like this, and these are points worth raising with them.

Read your own licences before a buyer does

Begin with the data and integration agreements, because they may hold wording nobody has looked at since signing. Find how each treats assignment, change of control, termination and renewal, and whether the board or association must consent, be notified or put the new owner through its own application. The terms come from the grantor, so the agreement is the authority, and the real answer may need a conversation with the board. Hold that conversation only after confidentiality is in place, because news of a sale can spread quickly.

Sort the client contracts by what happens at a sale

Next, go through every client agreement. A change-of-control clause and an anti-assignment clause are clauses to look for, though they are not the only ones. It helps to know which group each client falls into.

• Contracts that pass to a buyer without any consent, which cost nothing at closing.
• Contracts that need the client’s consent to assign, where the order and timing of asking matters.
• Contracts that let the client leave or renegotiate on a change of control, which puts that revenue at risk.
• Contracts near renewal or expiry, where terms may still be open on closing day.
• Side letters and informal promises, such as price locks or custom development, that never reached the paper.

Assemble evidence on the trust-accounting module

If the product holds, records or reports on client trust money, be ready for questions about how it was tested and who relies on it. Gather the audit-trail design, reconciliation and test records, release history, and any correspondence in which a client, accountant or regulator raised a concern. The reason is structural. Under regimes such as British Columbia’s Real Estate Services Act the trust-account duty belongs to the brokerage, so the question for the vendor is whether the software supports that duty properly. Take a view, with a lawyer, on whether the product has moved from supporting a licensed brokerage toward providing real estate services itself, as that Act defines them. Raising the question before listing keeps it from becoming a late surprise.

Decide what personal data a buyer may see

A proptech platform holds tenant, buyer and seller information that belongs in the first place to the clients’ customers. Under the federal Personal Information Protection and Electronic Documents Act, organizations that are parties to a prospective business transaction may use and disclose personal information without the individual’s knowledge or consent if they have entered into an agreement requiring the recipient to use and disclose it solely for purposes related to the transaction, protect it with safeguards suited to its sensitivity, and return or destroy it within a reasonable time if the deal does not proceed, and if the information is necessary to decide whether to proceed and then to complete the transaction. Quebec has its own rules: since September 2022 its law allows a business, on certain conditions, to communicate personal information without consent where that is necessary to conclude a commercial transaction, and since September 2023 an assessment is required before information leaves Quebec. The Privacy Commissioner’s guidance adds that an organization stays responsible for information it passes to a processor, so client contracts may limit disclosure further. One approach is to share summaries first and hold individual records back.

Know who might buy, and what each brings

A buyer might be a larger proptech platform or a brokerage network acquiring its own technology, and either may be foreign-owned or large. The Investment Canada Act applies to non-Canadians who acquire control of an existing Canadian business, requires a notification or an application for review unless an exemption applies, and lets the government review investments of any size on national-security grounds. Under the Competition Act, whether a merger must be notified to the Competition Bureau depends on financial thresholds tied to the size of the parties and the transaction, and on other criteria and exceptions the Bureau says are set out in the Act. Whether either regime touches a particular sale is a question for counsel before a letter of intent is signed.

What can delay a close

Delays can come from permissions rather than price: a board consent or fresh application started late, client consents arriving one at a time, a trust audit trail that must be exported without breaks, and contractor-written code whose assignments were never signed. Under the Copyright Act an assignment is valid only if it is in writing signed by the owner of the right or the owner’s duly authorized agent, so missing paperwork is not cured by goodwill, and tracing a former contractor can take time. Cutover timing can matter too, since clients that reconcile at month end may not welcome a migration in the middle of one. Starting the permission requests in parallel, rather than one after another, can shorten the path.