Selling an excavation and earthworks contractor in Canada

An owner who has decided to sell an earthworks business has a practical sequence to follow. A buyer may ask about the machines, the customers and the incident record, so preparation means being able to answer those on paper before a buyer asks. Documents such as lender payout statements, carrier records and insurance histories can take time to obtain, so ask for them early. This guide sets out the order of work, what the regulators and registries require, how to keep the sale confidential while customers and operators are still working for you, and what to expect when the buyer arranges financing.

Start with the fleet file

Build one file with a line for every unit: make, model, year, serial number, hours, condition, and who holds a loan or lease against it. A buyer may find it hard to price the business without it, and a lender may ask for the same document. Check that each machine shown as owned really is. Equipment that sits in a related company, a spouse’s name or a lease has to be sorted out before an offer, because it changes what is being sold.

Clear or disclose every lien

A lender may have registered security against your equipment, and a buyer or its lawyer may search for it. Ontario’s Access Now service explains, for used goods, that a search can show a lender may have rights in them, and that if the loan has been repaid the buyer should insist that the seller have the lender register a discharge before the sale is completed. A buyer or its lawyer may search the same way. Run the search on your own company first. Ask each lender for a payout statement and a commitment to discharge on closing, and fix any registration that still names a loan you have repaid. Other provinces run their own registries.

Assemble the safety and locate records

Gather your incident log, any claims correspondence, your locate procedure and examples of completed locate packages. Ontario Dig Authority says a complete locate package must be kept at the excavation site, so a company that can produce them for past jobs shows its practice. If you operate trucks in Ontario, order your carrier record; Ontario lists its commercial vehicle operator record (Level 2) as for carriers only. Reading it yourself first lets you explain any entry before the buyer finds it.

Control who learns of the sale

Operators, mechanics and general contractor customers may react to news of a sale, so decide in advance who is told and when. Share the fleet file and financials only after the buyer signs a confidentiality agreement, and describe customers by category before naming them. Consider holding customer introductions until the buyer is serious. Ask your lawyer how the agreement should treat employees and customers if the sale does not close.

Know what approvals the buyer will need

The buyer’s own qualifications matter to your timeline. The Régie du bâtiment du Québec publishes pages on which work requires a licence and on licence security and change of legal status, so a Quebec sale needs that checked early. Elsewhere, commercial vehicle rules are provincial: Transport Canada notes that provincial and territorial regulations govern the commercial truck industry, apart from the rules it sets for federally regulated (extra-provincial) carriers. Find out whether your carrier registrations can be moved or must be applied for again. Ask your accountant about the CRA’s GST44 election for the sale of a business.

Set the sequence before you list

Work backwards from the day you want to close. Recast the financial statements with your accountant first, because every later step depends on a figure you can defend. Build the fleet file and run the registry search next, since discharges take time. Gather the incident and locate records, then decide who inside the company is told and when. Only then approach buyers. Selling in that order means the first buyer to sign a confidentiality agreement gets complete answers, and you are not correcting the file while an offer is open and the buyer’s attention is on the next deadline.

What the buyer will ask you for

Be ready for requests for the fleet file, the recast statements, customer revenue by contractor or developer, and the contracts that are written down. Be ready for questions about each customer relationship that is not written down, and about who on staff the customers know. Be ready for questions about the incident file, about past sites, and about whether anything is owed to a lender, a supplier or a workers’ compensation board. The more of this you can hand over in a single organized package, the less the buyer needs to rely on assumptions, and each assumption is something to settle in the price.

• Fleet file with serial numbers, hours, condition and the lender or lessor for each unit
• Payout statements and discharge commitments from every equipment lender
• Incident log, claims history and sample locate packages
• Your carrier record, ordered from the province that issued it
• Signed confidentiality agreement before the fleet file or customer names leave your hands