Quebec business accelerator looks to Ontario for growth
Adrenalys invests in westward expansion with $350M funding for two-year cohort
Daniel Drapeau says his company, Miralis, which makes high-end kitchen cabinets, has tripled its production and sales over 10 years. Looking to grow the 250-employee company, Drapeau applied for a spot in Adrenalys, a Quebec business accelerator focused on midsize companies.
In Adrenalys, Drapeau secured funding, contacts and advice on plotting and executing an acquisition. In January, he acquired a fellow Rimouski, Que., company.
“So far it has worked pretty well,” he says of the deal, which is intended to boost Miralis’s retailing expertise. (Miralis currently sells through 100 retailers in Ontario, Quebec and the U.S.)
Buoyed by that experience, Drapeau predicts more growth and, possibly, a U.S. acquisition. “Everything is possible,” he concludes.
Adrenalys started in Quebec in 2015 with a 24-company cohort. That cohort, which includes Miralis, concludes in September. The organizers are now seeking 50 mid-size Ontario companies for a second two-year program. Among the perks: a promise of $350 million in available financing. (A second Quebec cohort of 25 companies will be recruited later this year, with a planned expansion into Western Canada in 2018).
Founder Dominic Deneault says he started Adrenalys because most efforts aimed at aiding businesses focus either on startups or bailing out big corporations. “In the middle it’s no man’s land,” he says. “Mid-size businesses are declining in this country.”
The program, run by a group of private companies, is seeking Ontario-headquartered businesses (private or public) that are at least five years old, have sales exceeding $10 million, and are majority controlled by Canadians. The goal is to help those companies become “global, competitive and fast-growing,” Deneault says.
The Ontario companies selected will have access to $7 million in pro-bono services from the private partners: Scotiabank, Roynat Capital, MNP LLP, Borden Ladner Gervais LLP, L&C Strategic Advisory Consultants, Proaction International and Finalta Capital.
The participating CEOs will take part in quarterly discussions with fellow chief executives, on topics chosen by the cohort. The companies also receive a two-week “business diagnostic,” to identify vulnerabilities and needs.
“We get a full picture of where the company wants to go and their main problems and issues,” Deneault says. “Based on that, we will propose solutions.”
But, he adds, “We’re not pushing any solution down any CEO’s throat.”
Most notably, the Ontario companies will have access to $350 million in financing and funding. (The Quebec cohort had access to $150 million).
Roynat Capital, a subsidiary of Scotiabank, is offering up to $300 million to the selected Ontario companies.
Financing is being offered with a 50 per cent discount on Roynat’s usual application and commitment fees, vice-president Jason Barr says. Roynat will also provide experts on merger and acquisition financing.
The company did not take part in Adrenalys’s Quebec cohort, but Barr says its client companies in Quebec gave the Adrenalys program strong reviews. “The feedback we got from those clients was universally positive,” he said from Calgary.
Asked how much of the available $300 million he expects to be secured by the Ontario cohort, Barr says: “We hope all of it.”
Adrenalys does not take equity stakes in its cohort companies, though each company must pay a $15,000 “membership fee” to take part in the two-year program.
According to Deneault, the fee has not been a deterrent to potential applicants.
“Honestly, that’s pocket money for a company,” he says. “Fifteen grand over two years for a mid-size business is a joke. It’s a rounding error in their financial statements. When it’s time to sign the contract, money is never an issue.”
Frederic Boulanger, CEO of Gatineau-based Macadamian, a custom software company with 200 employees, says the fee and time invested in Adrenalys has already generated a return. In fact, he says he should have made the investment earlier.
“Investing in (myself ) and the business to take the next step is something I have pushed out too long.”
Though, as he notes: “It’s fairly new that this type of offering is readily available.”
At the start of the Adrenalys program, Macadamian produced general software. His time in Adrenalys convinced Boulanger to focus exclusively on health care applications. He says his company’s health care business is now growing 40 per cent year over year. “It has helped the company grow. It has been a catalyst,” he says. “It helped me ask better questions about my own business …. And I made better decisions.”