National Post (National Edition)
Firm gives entrepreneurs profit-sharing advantage
CEO says aim is long-term partnerships
A new Calgary-based investment firm, Founders Advantage Capital, is making waves in the private equity world with unique partnerships it is forming with entrepreneurs.
It is led by president and CEO Stephen Reid, who previously served as president and CEO of Group West Corp. and as senior vicepresident of Alaris Realty.
A serial entrepreneur, he is also well known in Calgary as owner of Creative Restaurant Group, which purchased Lina’s Market earlier this year, and runs many Calgary hot spots including Cibo, Scopa, Bonterra Trattoria, Posto, and his latest venture, Mill Street Brewery.
Reid says Founders has flipped traditional private equity profit-sharing models on their heads — offering entrepreneurs a disproportionate share of growth. While each partnership is negotiated individually, Founders has acquired a 60 per cent interest in each of its first two deals while giving entrepreneur owners an incredible 70 per cent of all growth, instead of the traditional 40 per cent.
The target is to partner with passionate owneroperators who do not want to sell but stay and continue to operate and expand their businesses after the acquisition. They must be profitable with a good cash flow and in a business unrelated to the economy, such as those involved in health, seniors and pets.
The unique investment strategy won Founders its first two acquisitions with Dominion Lending Centres and the Trevor Linden Club 16 and She’s Fit fitness club chain.
Dominion is a mortgage brokerage firm that was launched 10 years ago by two partners who have expanded it to 650 franchise operations across Canada, giving it 40 per cent of the market share. They have been able to take cash out of the company while still running it and growing it with the staff they have trained well and will stay with the company.
Superstar Trevor Linden played 20 seasons in the NHL and opened his Club 16 fitness centres to provide a non-intimidating atmosphere where anyone would be accepted, respected and not judged. They have proved to be very successful throughout B.C.’s Lower Mainland from North Vancouver to Abbotsford, and his She’s Fit studios offer safe, fun and energetic fitness spaces for women only, in 13 locations.
On Dec. 22 Founders announced it had signed a letter of intent to acquire a 52 per cent majority interest in Impact Communications, which manufactures and distributes two-way radio accessories in the mobile radio industry.
Based in Kelowna, B.C., and with a U.S. delivery and international fulfilment centre in Wilmington, N.C., Impact has grown to be one of the largest aftermarket brands in North America.
Founders is interested in long-term partnerships, rather than short-term sales. “Entrepreneurs have fire in the belly, and we keep that fire burning if they get to keep the lion’s share of the profits,” Reid says.
“We understand that entrepreneurs identify personally with the businesses they create, and we respect the relationship they have with their companies. That’s why we look to truly be partners with them to provide the capital they need to grow their businesses further while seeking partial liquidity.
WE KEEP THAT FIRE BURNING IF THEY GET TO KEEP THE LION’S SHARE OF PROFITS.