Selling a third-party logistics (3PL) provider in Canada

A 3PL sale touches three things at once: the client service agreements, the warehouse lease and the staffing picture. The buyer is acquiring the right to keep running other companies’ inventory, so the sale involves your clients, your landlord and your crew. It helps to settle each before a buyer asks. The sequence below puts the work where it matters most. It starts with preparation, moves to confidentiality and data, then to staff and the buyer’s own filings. Treat it as a map of questions to settle, not as a deal plan. Work through it with your lawyer and accountant, who can fit it to your province and to the structure of the sale, whether shares or assets.

Prepare the documents the buyer will test

BDC suggests addressing supplier or customer concentration issues and reviewing contracts, leases and business agreements, updating them if needed. For a 3PL, list every client agreement with its term, volume commitments, termination rights and any clause that applies on a change of control. Gather the lease and its assignment wording. Pull together service-level reports, claims and damage history, and a recent inventory reconciliation by client. Also write down what only you do, such as quoting new work or settling a client dispute, so that you can show how each task will pass to a manager or to the buyer.

Plan who learns, and when

BDC warns that, depending on a listing site’s confidentiality procedures, word of a sale can reach employees, customers or suppliers, and that a change of ownership can be disruptive for all three. In a 3PL a client may be able to move its volume elsewhere. Decide whether you will run the process yourself or with an adviser or broker, and decide in advance which clients need notice or consent under their contracts, who tells them, and at what stage. Use a non-disclosure agreement before any buyer sees client names or rates, and consider whether the first look should be anonymized.

Client and employee data in the data room

A data room may hold personal information about client contacts, shippers’ end customers and staff. Under section 7.2 of the federal Personal Information Protection and Electronic Documents Act, in addition to the circumstances in subsections 7(2) and (3), organizations that are parties to a prospective business transaction may use and disclose personal information without the knowledge or consent of the individual if two conditions are met. They must have an agreement requiring the receiving organization to use and disclose the information solely for purposes related to the transaction, protect it with security safeguards appropriate to its sensitivity and, if the deal does not proceed, return or destroy it within a reasonable time. The information must also be necessary to decide whether to proceed and, if so, to complete the deal. Subsection 7.2(4) excludes transactions whose primary purpose or result is acquiring personal information. Provincial privacy laws may apply in some provinces, and it is worth asking counsel whether shipment records should be redacted before disclosure.

Staff continuity

Check how the crew will be treated on a sale. The rules depend on which jurisdiction’s employment standards govern the workplace. Under Ontario’s Employment Standards Act, 2000, section 9, if an employer sells a business or a part of one and the purchaser employs an employee of the seller, the employment is deemed not to have been terminated or severed for the purposes of the Act. That rule does not apply if the purchaser hires the employee more than 13 weeks after the earlier of the employee’s last day with the seller and the day of the sale. Alberta’s Employment Standards Code, section 5, deems employment continuous and uninterrupted, for the purposes of the Code, when a business or part of it is sold, leased, transferred or merged. Confirm with counsel which rules apply to your workplace.

Check whether the buyer must notify the Competition Bureau

Where the buyer is a large operator or investor, check whether the Competition Act’s pre-merger notification applies. Subject to that Part, section 114 requires the parties to a proposed transaction to notify the Commissioner and supply the prescribed information before the transaction is completed, in the circumstances set out in section 110, and section 109 says the Part does not apply unless the parties and their affiliates exceed its size thresholds. Section 123 bars completing a notified transaction before the end of 30 days after the Commissioner receives the required information, or 30 days after receiving any additional information the Commissioner asks for within that period, unless the Commissioner ends the wait early under subsection 123(2); section 113 exempts some classes of transaction. Whether the size tests are met depends on the sizes of the parties and the transaction, so ask the buyer’s counsel early rather than discovering a waiting period close to closing.

• A schedule of every client agreement showing term, volume commitments, termination rights and change-of-control wording
• The lease, with the landlord’s assignment and renewal provisions marked
• A client-by-client inventory reconciliation and a record of damage and shortage claims
• A staffing list showing roles, tenure and who holds the operating knowledge
• A confidentiality and data-handling plan for the data room before the first buyer sees anything