Crude Observations

Let’s Make a Deal

I often get asked about the current state of the M&A market. In Alberta. In energy services. In Canada. In general. These questions come from private equity firms, lawyers, prospective clients, current clients, lenders, family, friends. Still waiting on media questions, but maybe that can wait.


My universal stock answer is that “it depends” and that for every business at any time there is a buyer.


Then I typically get asked about valuations, which is a legitimate question at this point in any cycle – late stage for tech, early stages for energy services and with inflation running hard one everyone’s heels, interest rates (and thus cost of capital) rising and war and supply chain issues and pandemics wrecking the perceived party for everyone.


My universal stock answer for the valuation question is again “it depends”. This time it’s the nature of the buyer and their perception of risk vs missing out on opportunity. Or the vendor and their appreciation of the different risk profiles of a cash-weighted deal vs one that carries significant vendor risk against perhaps an elevated price.


Lately though, the answers have been much more specific.


How is the M&A market? For our client demographic? Great. How is it for energy services? Again, pretty good. Alberta? Robust.


And valuations? Pretty good. In fact, for some businesses, very good.


How do I know this? Well experience in the market first. Second, when buyers exceed our own expectations, that’s a good sign. When they exceed Vendor’s expectations? An even better sign.


But it’s not just me talking. It’s actual experience. And an opportunity to pat ourselves on the back.


We are busy. Busier than we have been in a long time and our client demographic runs the gamut from traditional upstream oil and gas service to medical clinics and a buffet of non-energy related B2B companies.


Since October last year we have closed five sell-side transactions. This may not seem like a lot, but trust me, in the private mid-market M&A space, this is significant.


Each of these transactions was distinct in terms of mandate and buyer demographic so I thought it would be a good “toot your own horn” exercise to describe what we did, what we can disclose and hopefully provide a little context on the state of the M&A market.


Cross Country Infrastructure Services Canada


In late 2020 we were approached by Odyssey Investments, the US-based private equity owner of Cross Country Infrastructure Services Inc. to see if we thought we could run a mandate to sell their Canadian-based subsidiary.


Cross Country is a very large rental and equipment supply business that specializes in providing equipment to pipeline contractors. As part of a strategic review, it was determined by the board that the Canadian operations were no longer integral to their business, mainly due to size, so it was decided to put in on the market.


Stormont’s mandate was to run a broadly-marketed process across a range of strategic and private equity buyers with the goal, as always, to maximize price and do a clean transaction.


What made this mandate unique was both the nature of the seller and the buyer demographic. On the one hand, we had a classic corporate carve-out of a turnkey business by a vendor who was interested primarily in repatriating cash. On the other hand, it soon became apparent that the “best” buyer was actually the incumbent Canadian management team.


Ultimately it was the Canadian management team whose offer was accepted. They were able to secure favourable financing from a Canadian chartered bank and our client was thus spared of having to carry any significant vendor financing.


The deal closed on October 26 and the new Canadian business was branded as “Cross Country Canada Rentals and Supplies” under new ownership of Tim Martin and equity partner, Kade Demuth.



Polar Septic


Polar Septic is a privately-owned Alberta-based company that has a well-established footprint in providing scalable waste treatment plants and ancillary services to energy, heavy industry and remote-camp companies serving the Construction, Energy, and Mining sectors across western Canada.


We were approached by the husband-and-wife ownership team pre-pandemic about their options for the company which they had bootstrapped together from an early age. Planning for their future, they had plans to relocate and transition into different businesses and had figured out that to get to where they wanted to be in five years, they needed to start the process then.


Our mandate, again, was to run a broadly-marketed process targeted mainly at strategic buyers due to considerations relating to size and the specialized nature of the business.


Right out of the gate we got interest in the company but when the pandemic hit, all discussions stopped until market sorted itself out.


Fast forward to 2021 and after consultation with the client, we decided to remarket the deal and, as it turns out, one of the buyers who had initially declined the opportunity due to timing was the one to step forward and submit the best offer.


While the COVID related trailing results for this business were pretty severely impacted by the pandemic, the order book was full as the economy re-opened and the buyer was smart enough to pay for the business on the basis of an emerging rebound rather than penalize the vendor for events out of their control.


In this case we benefitted from a sophisticated private equity owned buyer, UK-based Centurion Group, owned by SCF Partners, that had extensive operations in Canada, including a division providing the same services as our client.


The deal closed on November 15, 2021 (what’s with these mid-month closings?) and has been a success for both parties.


FKD  Contracting


FKD is a registered federal carrier specializing in the commercial transport of Dangerous Goods (ammonium nitrate) from client’s manufacturing locations to end-user mine sites throughout Western Canada.  The company benefits from multi-year contracts on all lanes (routes) with contracts having a 3 to 5-year term with provisions for renewal.


Sounds dry, right? Let’s try that again.


FKD is a family-owned and oriented private business and specialized carrier based in the BC Interior that delivers dangerous explosive materials to mine sites in some of the most remote and rugged sites in Canada 365 days a year. The company’s remarkable safety record and long-term client relationships and contracts made it a uniquely attractive target in this segment.


The mandate for Stormont here was clear. As a pure retirement play and limited desire on our client’s part to stick around for an extended transition, the buyer was most likely going to be a strategic and was also required to be someone who would meet our client’s specific requirements of “not being someone who is going to screw it up” as well as having the capital to meet the growth needs of the business going forward.


Given the unique nature of the business and a very active M&A market in the transportation segment, interest was immediate and competition for the deal was robust.


Ultimately, TFI International Inc. emerged as the successful suitor. TFI is a North American leader in the transportation and logistics industry, operating across the United States, Canada and Mexico through its subsidiaries. TFI creates value for its shareholders by identifying strategic acquisitions and managing a growing network of wholly-owned operating subsidiaries.


TFI was a perfect fit for our client. They checked all the boxes and as a successful serial acquiror they had a relatively seamless approach and a dedicated deal team that was available 24/7 to make sure the deal closed with minimal obstacles.


This transaction closed on December 10, 2021.


Advanced Paramedic Ltd. (APL).


In operation for more than 20 years, Advanced Paramedic Ltd. Is a premier provider of emergency paramedic services across Alberta. APL is committed to providing the highest quality Air Ambulance, Ground Ambulance, Industrial, Remote Northern Clinics, Special Events, Medical Standby, and Non-Emergent Medical Transport services across the region. Their services are delivered primarily across the northern part of the province providing a critical healthcare link for First Nations and other remote communities to health care centres in more accessible urban locations. Their primary clients are Alberta Health Services and the Federal Government.


This mandate was unique in that with APL we had what was in essence a turnkey business but an owner who had an eye to both the Company’s future and his own. While achieving liquidity was a key goal as it should be in any transaction, our client was also committed to being a critical part of the success of the Company and any acquiror for years after close. This commitment allowed us to target a much broader buyer demographic.


In this instance we ran a broadly marketed process that encompassed strategic buyers, private equity seeking platform investments and private equity backed strategics.


Interest in this opportunity was immediate and very positive. We received multiple offers from both Canadian and US-based buyers, mainly private equity backed strategics.


Ultimately, our client elected to proceed with Exchange Income Corporation (EIC), a publicly traded Canadian company that has a specific niche in aviation and aerospace. Based in Winnipeg Manitoba, EIC is an acquisition-oriented company that partners with well-established companies with strong management teams that generate steady cash flow and operate in niche markets. Ironically, the last deal I did before I left Deloitte was the sale of an Abbottsford based specialty metal manufacturer to EIC – a business they still own.


At any rate, APL is a great fit with EIC due to its aviation investments and air ambulance business. Our client also felt that EIC’s familiarity with the Canadian market provided it a leg up relative to other buyers.


Needless to say, EIC helped their cause with the best risk-adjusted offer.


This transaction closed on May 11th.




This one hasn’t been formally announced by the owner or the buyer yet, so I will need to be fairly vague.


We were engaged by the owners of this company early in 2022 to assist them in exiting their business and freeing up liquidity so they could pursue other business opportunities. While active in the supervision of the business, the owners were not intensely involved operationally so this was in essence a turnkey opportunity for whoever was the acquirer.


Having done more than a dozen transactions in the health, safety and remote medic space in the last decade (including APL above), we are intimately familiar with the industry and understand the buyer demographic to such an extent that we are on a first name basis with most of the executives in the industry.


We were able to quickly match up our client with a similarly sized competitor that was very interested in expansion and made an appropriately clean and risk-mitigated offer for our client’s business that was respectful both of their desire to exit cleanly while also preserving the legacy of the business going forward.


The effective date of this transaction is June 1st.


Like I said, it’s been busy.


With six more deals in the market and another batch to come over the next while it promises to continue being busy. Such is the life of the M&A firm.


If you are interested in finding out more about the above deals and get more colour on the processes or challenges or even just want to shoot the sh** about M&A and the economy, drop me a note anytime. I am happy to chat.





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