WANTED: Retiring Entrepreneurs Looking To Sell Their Business
MONCTON — A New Brunswicker who recently returned from living in the United Kingdom is looking for a successful business in the region to acquire for his new venture.
Derek Smith is the founder and principal of Atlantic CAN Capital, a new firm that’s looking to acquire an existing company in Atlantic Canada, particularly, one where the owners are looking to retire and are seeking a solid succession plan.
Smith, who is originally from Moncton, is an Acadia University graduate and Chartered Financial Analyst with over 15 years of investment banking and private equity investment experience in Canada and the United Kingdom.
Smith worked in London for 13 years before deciding to move home. After closing a major deal at his old firm in early 2020, he said and his wife finally saw the opportunity.
“At my most recent firm, I did a management buy-out of a fully regulated and authorized merchant bank, which is a member of the London stock exchange. We did energy and infrastructure investments most in Europe, but in other markets as well,” said Smith, in an interview with Huddle. “With some success and an exit, it gave the ability to think do we make another five-plus year commitment in London?”
Moving to a bigger city like Toronto with a strong financial district would have been the natural move, but Smith said after further research, returning home to Atlantic Canada seemed more appealing. Factors such as good universities; access to talent; both official languages; low cost of living and strong digital infrastructure all played a role.
But instead of finding a new firm to work for, Smith decided to take a different approach and create his own.
“We started thinking maybe I could be back in the Maritimes and look at acquiring an established profitable business from an owner that is seeking to do other things with their time,” said Smith.
“There’s an aging demographic here, everyone’s aware of that and a lot of that is in the business community.”
Atlantic Canada’s aging population not only big social challenges but economic challenges too. A January 2021 report from the Atlantic Provinces Economic Council noted that about 25,000 Atlantic businesses could be looking for new owners over the next two decades. This provides opportunities for companies like Atlantic CAN Capital.
After making a trip home in October to chat with business owners, accountants, advisors, wealth managers, Smith decided to go ahead with the move.
“I had a really successful trip in October, validated the idea, and came up with the name,” he said. “I was thinking of a few things, but ‘Atlantic Can’ Capital just felt like the right fit.”
Atlantic CAN Capital is seeking a company with $500,000 to $2-million cash flow. They will provide a new perspective, new ideas and will pursue growth opportunities, including new markets.
“The reality is I’m looking for a good business that is profitable, that has good margins, and has inherited advantages of good customer relationships, suppliers, and an excellent team of employees,” said Smith.
“It’s not just to buy it for the sake of it, it is to grow it and transform it, it’s critical that it has the employees and the capabilities to achieve that.”
Smith is open to any sector except for heavy equipment manufacturing. He’s looking for a company that can be based in the region, but not be geographically constrained to it. A business that could grow into the rest of Canada, the United States and other markets.
“What I’m tending to avoid is big heavy manufacturing or businesses that require a lot of property, plant, and equipment, which would struggle, in my view, to generate an attractive enough return on total capital,” said Smith.
Smith said he’s had lots of good meetings and conversations since he started research in the fall and has been presented with promising opportunities. He’s hoping to find his company within the next two years.
“It’s a long-term process. I say I’m committed to at least two years. If it takes longer than that, but I feel like I’m making progress, so be it.”
He said he doesn’t plan on purchasing more than one business under Atlantic Can, he would consider doing consolidation within a particular industry.
“Let’s say there’s a long tail of 15-20 regional players in the Maritimes that are all doing their own thing but would benefit from the scale, efficiencies and professionalization of their systems,” he said. “What I would do is acquire one business, then quickly look to acquire another two, three or four. But would all ultimately be within one single business.”