When the opportunity to purchase a majority of Duncan-based piling and drilling company, Construction Drilling Inc., presented itself to Joel Thompson, he jumped at the chance to fulfill his dream of becoming a business owner. The owners of the 20-year old company were ready to start relinquishing management duties and eventually exit the business and retire. Four partners – including an existing manager – had existing relationships with the owners and were ready and willing to purchase the business.
“We saw a perfect opportunity to use our collective industry experience and skills to build upon an already successful business. We’ve spent our careers working for other people, and we were all looking for the right chance to purchase our own business,” says Joel. “The previous owners love the business, it’s their life’s work, and this arrangement allows their continued involvement in the aspects of the business that excites them while we run the day-to-day operations.”
Although the combination management buyout / shareholder buy-in was a win-win for the new and existing owners, they needed to secure financing to fund the deal. “Financing for construction companies is typically challenging due to the nature of the industry and the significant investment in our heavy equipment,” explains Joel. “We require long-term financing and working capital to be able to simultaneously complete contracts and continue to grow.”
Joel and his partners needed financing, in combination with their own equity, to buy a majority of the company without compromising the cash flow of the business. They were introduced to First West Capital through a banking advisor after exploring private equity and other alternative lenders. “First West Capital was very helpful in working through the challenges of the deal – they understood the risk and reward of our business, where others didn’t,” explains Joel.
First West Capital provided the partners $1 million to complete the sale of the business. “We love helping mid-market businesses like Construction Drilling, which has created a viable succession plan with exciting plans for growth,” says Greg Smith, Senior Associate at First West Capital. “They have a strong, knowledgeable management team plus the backing of the previous owners – it’s an ideal combination.”
“There were a lot of stakeholders involved with this deal, and we appreciated First West Capital’s flexibility and willingness to handle the needs of multiple owners and partners. It was crucial in helping the deal get done,” says Joel.
He adds that the key to a successful transition is having stakeholders and partners that share the same vision for the business, “Transitions aren’t easy, but Greg and the First West Capital team were able to really help us dig deep to solve problems and move the deal along. They also introduced us to First West Leasing, which has allowed us to optimise our capital structure through equipment leasing – that’s huge for us since equipment is such as big part of our business.”
In the next year, Construction Drilling plans to modify its organizational structure, connect with customers and continue to evaluate the market for new opportunities. Future plans include expanding the company’s current scope, which is limited to pile-driving and drilling, and by taking on new contracts in Alberta, Saskatchewan and Manitoba. “We recently set up an equipment yard in Edmonton, which will allow us to transport our heavy equipment to those areas more cost effectively,” notes Joel.
Joel and his partners are hitting the ground running, and emphasize that they couldn’t have done it without good financial partners, “Finding financing on our terms was harder than we expected. We’re happy that First West Capital shared our vision and came to the table with smart, creative financing,” says Joel. “Now we can concentrate on running and growing the business; it’s very exciting.”