Acquisition entrepreneurship: Take up the torch!
Can you throw yourself into an industry you don't know anything about? That's the gamble that Emer Mestiri and Rimy Sakr took. The couple always knew that their way in to the business world would be through an acquisition—and that story is anything but ordinary.
When he took over a company specializing in corrugated cardboard, Emer Mestiri knew nothing about the subject. However, the decision was carefully considered. The couple had spent 5 years researching before they found the perfect opportunity. It checked all the boxes, and it was the chance to turn their dream of owning a business into a reality. Mestiri had turned to business acquisition experts to help him find the right small to medium-sized business (SMB). He's now the owner of OnduCorr Packaging.
With a master's in applied finance and 12 years in the banking sector, he knew all about the challenges that new businesses face. And that's why he knew that acquisition was the way to go.
"Entering the business world through an acquisition is a huge challenge. You're throwing yourself into something you know nothing about, and you have very little experience. But for me, as a father and an entrepreneur just starting out, building up a business from square one would have been even more difficult."
- Emer Mestiri, owner, OnduCorr Packaging
According to the Centre de transfert d'entreprise du Québec, the number of businesses open to a transfer went up 147% since 2020: it climbed from 15,000 to 37,000 since the start of the pandemic. In the coming years, as more and more business owners reach retirement, it's expected that 31% of Canadian SMBs for sale will be in Quebec1.
The takeover: No simple feat!
The couple took control of OnduCorr in the fall of 2021, in the middle of the pandemic. "One of the biggest challenges," Mestiri recalls, "was understanding how the company operated and learning about the external environment. All of that at a time when we were having supply chain issues and a labour shortage."
"Taking over a company comes with a kind of built-in support, whether it's from your predecessors, the team in place, the experts in the field. There's already a structure. This was a significant factor we considered when we decided to acquire."
- Emer Mestiri, owner, OnduCorr Packaging
Another big challenge: the emotion that came with the transition. For the company's founders, it was a lifetime of work they were leaving behind. "To someone who knew nothing about it, no less!" Mestiri adds. Resilience and empathy were key to getting through this particularly challenging time.
Switching to the big leagues
Now, 18 months after the acquisition, economic uncertainty and inflation are shaking the manufacturing sector. "There will always be these kinds of cycles, like the ones we're experiencing now. You have to surround yourself with the right people. Key players in the organization, external partners, accountants. And don't wait until things get bad to go to them."
Looking back, Mestiri can be thankful that they played it safe by buying a financially healthy SMB with strong, tangible assets as collateral. Even if times are tough, OnduCorr is holding up. "The goal is for our company to become a key player in the sector. We're doing well in the little league. But we're aiming for the big leagues."
In hindsight, what advice would you give yourself on the first day of your journey as an entrepreneur?
"Buckle up! Now's not the time to get discouraged. The biggest decisions have already been made—it's time to carry on and get down to business. Starting out as an entrepreneur, it's like a dream. You've got to experience it. You have to take the good times as they come and be ready to navigate the tougher ones."
What are the advantages of taking over an existing business?
Acquisition entrepreneurship isn't as rare as it used to be, according to Richard Quinn, Director, Business Transfers, at Desjardins. "And really, it's still entrepreneurship."
A market full of acquisition opportunities can be a boon to future entrepreneurs. "If the SMB is well-established, with a proven business model, with partners in the market, if it's viable—it's a chance for an entrepreneur to really develop its potential," Quinn explains.
Another benefit: as opposed to a startup, which can take years to finally turn a profit, it's easier to secure the funding to acquire an established business. Whether it's through business transfer loans, a balance of sale, subordinated debt or government programs, advisors can help buyers create a balanced financing package that ensures the company's long-term viability.
Beyond the numbers
"A transfer is a shock to the business, so be ready," adds Quinn. Indeed, an acquisition necessarily entails an upheaval for teams, partners and suppliers. This is why, beyond purely financial questions, buyers and sellers need step-by-step guidance during this critical period. A business transfer plan helps owners, often years in advance, plan how they will transfer their business to the next generation.
External specialists can help SMB owners identify who will take over the business, whether it's discovering them internally or working with potential buyers, often with the help of Desjardins. "Business owners don't always opt for the more innovative route, as is sometimes the case with employee buyouts," Quinn says. "It's often a qualified takeover entrepreneur who knows the company and the industry."
1 Business Acquisitions: A Strategy That Drives Growth, BDC, 2021.