Acquisition is the fastest legitimate route to scale, and the retirement of a generation of Canadian business owners has put an unusual number of profitable, unglamorous companies on the market. It is also where inexperienced buyers lose the most money, almost always on working capital and on earnings quality.
Quality of earnings before valuation
A seller presents adjusted EBITDA. Your job is to test each adjustment. Owner compensation above or below market, personal expenses run through the company, one-time revenue treated as recurring, deferred maintenance, related-party rent below market: each of these moves the multiple you are paying without moving the price. Normalize them first, then negotiate.
The working capital peg
Most first-time buyers negotiate price hard and then hand back the savings in the working capital adjustment. Establish a normalized target based on a trailing twelve-month average, define it in the purchase agreement, and hold the definition through closing. A peg set carelessly is a six-figure transfer for a mid-market deal.
Customer and contract concentration
- Revenue by customer for three years, not one. Concentration that is falling reads very differently from concentration that is rising.
- Change-of-control clauses in every material contract. A contract that terminates on sale is not an asset you are buying.
- For businesses serving Indigenous procurement set-asides or with community-linked contracts, confirm how ownership thresholds and certification carry through the transaction. Getting this wrong can extinguish the very revenue you are paying for.
- Key-person dependency. If the retiring owner is the relationship, price and structure a transition, do not assume goodwill transfers.
Structure absorbs uncertainty. Vendor takeback notes, earnouts tied to defined and auditable metrics, and holdbacks against specific identified risks are all ways to buy a company you are ninety percent confident in without paying as if you were fully confident.