Confederation M&A is delighted to welcome Brad Ezard as new Partner.

Brad brings an impressive track record in mergers and acquisitions and business operations to Confederation, with previous experience as an M&A lawyer in Washington, DC, and as the Chief Operating Officer of Ottawa’s Keynote Group. At Latham & Watkins LLP, he advised on multimillion-dollar mergers and acquisitions. His practice also extended to private equity investments and public company representation for some of Wall Street’s biggest names.

In addition to his experience as a lawyer and operations executive, Brad led MCA Dental’s early-stage operations and acquisition strategy for the firm, which acquires and manages dental clinics across Canada.

In addition to his corporate work, Brad also sits on the Board of Directors for Bruyère Hospital where he also serves on the Board’s Quality of Care Committee.

Brad joins Confederation M&A as the Ottawa-area mergers and acquisitions market grows.

“We’re excited to welcome Brad to our team,” said Confederation President for Ottawa, Chad Saikaley, “As a mergers and acquisition lawyer and a specialist in corporate restructuring, he comes to us with a unique skill set. Along with the firm’s team of financial experts, he’ll be offering the highest level of service and outcomes for our clients.

“Aside from his business success, Brad’s deep involvement in the community’s charitable causes totally aligns with Confederation’s corporate culture and values,” added Chad.

The evolving landscape of Employee Ownership Trusts (EOTs) and the accompanying tax incentives could paint an intriguing picture for qualifying businesses poised to change hands from 2024 to 2026. To encourage business owners to sell their companies to EOTs, the federal government has announced that the first $10 million in capital gains realized on the sale of a business to an EOT will be tax exempt.

Over the next 10 years, a significant number of Canadian businesses are expected to undergo transitions in ownership as entrepreneurs approach retirement. The anticipation of this sizable shift emphasizes the need for innovative strategies, such as the introduction of EOTs, to ensure seamless succession while preserving the businesses’ core values.

Changes Unveiled: 2024-2026

The timeframe between 2024 to 2026 marks a critical juncture for businesses considering EOTs. This period introduces pivotal changes and improved tax incentives aimed at facilitating a smoother transition.

How do EOTs Work?

An EOT would generally be set up as follows:

  1. EOT is formed with the employees of the business being named the beneficiaries of the trust;
  2. The trust then negotiates terms and conditions for the purchase of the business’s shares. Debt financing is arranged to allow the EOT to purchase the shares, which the business itself might provide; and
  3. EOT provides debt repayments over time using the earnings distributed from the business.

Qualifying for an EOT

To qualify for an EOT, businesses must meet specific criteria, including being a Canadian-controlled private corporation (CCPC) which would require it to meet certain governance and board representation requirements. This strategic alignment ensures that EOTs are established with a genuine commitment to employee ownership, fostering collaboration and shared success.

EOT Advantages

The benefits associated with EOTs are multifaceted. Business owners gain a tax-efficient exit strategy (see below) while maintaining a lasting legacy within the company. Employees, in turn, acquire a direct stake in the business, leading to increased morale, productivity, and loyalty. The synergy created by EOTs aligns the interests of both owners and employees, laying the foundation for sustainable business growth.

Tax Benefits of EOTs in Canada

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For business owners in Canada considering an exit between 2024 to 2026, EOTs will be a structure that they may want to consider when evaluating options for a transition of their business. Companies with stable cash flow and profits are likely the businesses that will be considering EOTs. The tax exemption on the first $10 million in capital gains, coupled with the other unique advantages of EOTs, have potential for this structure to be an active succession planning option through to 2026.


Peter MacSwain
peter.macswain@confederationgroup.ca

Over 75% of Canada’s business owners plan to exit their business within the next decade and about 1 in 10 business owners have a formal business succession plan in place. Succession planning has always been important, but in today’s market, it is critical given the number of businesses that will change hands in the near future.

Business owners with a succession plan in place will set themselves apart from those that do not.

A well-structured succession plan can bolster buyer confidence, provide operational stability, and ensure a smooth transition for all parties involved in the transaction – all of which increase the salability and value of the business.

From an M&A perspective, below are some of the key areas to focus on in advance of a potential sale of a business:

These are just some of the areas, that if addressed in the years prior to the sale of a business, can have significant impacts on the outcome of the transaction. Given the volume of businesses anticipated to change hands in the coming years, taking the time now to diligently address these strategic initiatives can help secure the future success of the business and maximize its value when the time comes to sell.



Peter MacSwain
peter.macswain@confederationgroup.ca

What is Working Capital?

Working capital is the difference between current assets and current liabilities. It represents the capital required to run the day-to-day operations of a business and meet short-term obligations, such as payroll, rent, utilities, inventory purchases, etc.

Working capital is considered to be a component of business value and is therefore included in the sale of a business.

Why is it Included in the Sale of a Business?

There are sellers who believe accounts receivable, inventory, deposits, etc. belong to them, and therefore the buyer should pay for these assets on top of the purchase price. However, amongst other factors, these assets are the reason that the business is able to generate revenue through providing services, selling products, and providing value to its customers. The value of these assets is reflected in the earnings of the business which drives business value and at the end of the day, the sales price of a business.

What Amount of Working Capital is Included in the Sale of a Business?

A working capital target will be included in a letter of intent (LOI). The LOI should include a clearly defined approach for how working capital will be treated in the purchase and sale agreement.

Working capital requirements vary significantly from industry to industry and business to business and can fluctuate throughout the year for each business. One approach to determine the target is to look at the trailing 12 months (TTM) of balance sheets. This provides a glimpse of where working capital lands throughout the year and offers insight into seasonal fluctuations. Having sound financial information is critical to provide backup as to where the working capital target lands.

Some sellers make the argument that their working capital is higher than it needs to be and that the buyer should compensate them for this. A working capital analysis to dive deeper is required to understand the mechanics of working capital in anticipation of a discussion with a potential buyer. A case can be made when there is clear evidence showing that working capital is higher than it needs to be. However, without clear evidence, it may be difficult to convince the buyer and their lender to take the seller’s word that working capital is higher than it needs to be. As a seller, it’s very important to manage working capital diligently leading up to the sale of the business.

Working Capital on Closing Date vs. Target Working Capital

The difference between the actual working capital on the closing date and the target working capital will lead to a purchase price adjustment. The mechanics of the adjustment should be clearly defined in the purchase and sale agreement. If actual working capital is less than the target, then there would be a purchase price adjustment in the buyer’s favor. If actual working capital is greater than the target, then there would be a purchase price adjustment in the seller’s favor.

Resolving Working Capital Disputes

Disputes regarding working capital are not uncommon. Clear documentation and well-drafted purchase and sale agreements are key. Disputes may be resolved through negotiation, mediation, or by following predetermined mechanisms detailed in the purchase and sale agreement.

Working capital is an important piece of every M&A transaction. Developing a working capital target and having a clear understanding of the components of working capital in an LOI and purchase and sale agreement are essential to every transaction.

For business owners considering a sale in the upcoming years, proactive year-round management of working capital is a major factor that will help pave the way to a smooth transition of your business.



Peter MacSwain
peter.macswain@confederationgroup.ca

  1. Continuity and Stability:

A strong management team provides a sense of continuity and stability to the business, the other team members, and a prospective purchaser. When potential buyers or successors assess a company, they look for evidence of a well-functioning team capable of sustaining operations without significant disruption. A cohesive and experienced management team instills confidence, reducing uncertainties and risks associated with a change in leadership.

  1. Operational Excellence:

Effective management is the backbone of operational excellence. A competent team ensures that day-to-day activities run smoothly, maintaining productivity and efficiency. When preparing a business for succession or sale, potential investors or buyers scrutinize the operational prowess of the team. A robust management structure demonstrates the business’s ability to navigate challenges and capitalize on opportunities, making it a more attractive proposition.

  1. Customer and Employee Confidence:

Customers and employees alike place trust in a business with a strong management team. During a transition, this trust becomes particularly vital. A well-led team is more likely to maintain positive relationships with existing clients and employees, assuring them that the company will continue to deliver quality products or services. This confidence is invaluable during succession or a business sale, as it minimizes the risk of customer and employee attrition which is always a concern of prospective buyers.

  1. Strategic Vision and Planning:

A competent management team is instrumental in crafting and executing strategic plans. Prospective buyers or successors seek businesses with a clear vision for the future and a strategic roadmap to achieve goals. A management team that is adept at strategic planning adds substantial value to the business, making it an attractive prospect for those looking to invest or take over the reins.

  1. Risk Mitigation:

The business landscape is fraught with uncertainties, and a strong management team plays a critical role in identifying and mitigating risks. This capability becomes especially crucial during a succession or sale, where potential risks can impact the transaction. A team that can navigate challenges effectively ensures a smoother transition, safeguarding the business’s value and reputation.

  1. Adaptability to Change:

Successful businesses are those that can adapt to change swiftly and effectively. A management team with a track record of adaptability is an asset when planning for succession or a business sale. The ability to embrace change, respond to market dynamics, and capitalize on emerging trends positions the business as a resilient and forward-looking investment.

In conclusion, when planning for succession, the importance of a strong management team cannot be overstated. It is the linchpin that holds the fabric of the business together, ensuring continuity, stability, and the ability to withstand an ownership transition successfully.  



Jill Bouchier
jill.bourchier@confederationgroup.ca

When it comes to purchasing a company, there are several factors to consider, and the process can be complex and time-consuming. One of the most important decisions that prospective buyers need to make is whether to use an M&A advisor. Below we’ve compiled a list of some of the ways an M&A advisor can be beneficial in your pursuit to acquire a private company.

  1. Access to Opportunities – M&A advisors have an extensive network and can leverage their contacts to access a pool of potential acquisition targets that prospective buyers may not be able to reach on their own. This can help ensure that buyers have access to a broad range of opportunities that fit their target criteria, increasing the likelihood of finding the right business to acquire.
  2. Expertise and Experience – Using their deep understanding of the market, M&A advisors can provide guidance and support throughout the transaction process, from qualifying potential targets to analyzing company information and negotiating and closing the deal. M&A advisors can use their experience to help buyers navigate the complexities of the acquisition process, ensuring that they make informed decisions and avoid common pitfalls.
  3. Valuation Expertise – M&A advisors have a deep understanding of the factors that influence the value of a business, and they can help buyers determine a fair market value for the company they are considering acquiring. This includes a thorough analysis of the company’s financial performance, industry trends, and comparable transactions. An M&A advisor can help buyers make informed decisions about the value of the company they are considering acquiring, ensuring that they pay a fair price for the business.
  4. Deal Structuring and Negotiation – Once a target has been identified, an M&A advisor can help with structuring and negotiating the terms of the transaction. This includes developing a letter of intent to present to the target, which outlines the purchase price and payment terms of the deal. An M&A advisor can help ensure that the deal is structured in a way that meets the needs of both the buyer and the seller and that the transaction is completed smoothly and efficiently.
  5. Due Diligence – One of the most critical aspects of buying a company is conducting due diligence, which involves a thorough investigation of the company’s financial and operational performance, legal and regulatory compliance, and other factors that may impact the value of the business. An M&A advisor can help conduct and manage the due diligence process, ensuring that the buyer has a thorough understanding of the company they are considering acquiring and identifying any potential risks or issues that may impact the transaction.

For many reasons, using an M&A advisor can provide significant value in the process of acquiring a private company. From access to opportunities to valuation expertise and due diligence capabilities, an M&A advisor can help buyers navigate the complexities of the acquisition process and reach a successful outcome. If you’re considering acquiring a company, our team would love to connect with you to discuss how we can help you achieve your goals.



Jill Bouchier
jill.bourchier@confederationgroup.ca

Selling a small to medium-sized private company can be a complex and time-consuming process. For many business owners, the sale of their company is likely the most significant financial transaction of their life, and getting it right is crucial. Below we will discuss the value of using an M&A advisor when selling a small to medium-sized private company.

  1. Expertise and Experience – One of the primary benefits of using an M&A advisor is their expertise and experience. M&A advisors specialize in the sale of businesses, and they have a deep understanding of the market and the process involved in selling a company. They can provide guidance and support throughout the entire process, from preparing the company for sale to negotiating the deal and closing the transaction. The team at Confederation M&A has closed over 100 deals across many industries in the last 10 years.
  2. Confidentiality – Selling a business can be a sensitive matter, and maintaining confidentiality is essential. An M&A advisor can help ensure that the sale process is kept confidential through the use of non-disclosure agreements, a secure virtual data room, and by only approaching qualified buyers with information about the company for sale. Working with an M&A advisor will help protect the company’s reputation and prevent employees, customers, and suppliers from becoming aware of the sale until the deal is complete.
  3. Access to Buyers – One of the most significant challenges in selling a business is finding the right buyer. M&A advisors have an extensive network of contacts and can access a pool of potential buyers that business owners may not be able to reach on their own. This can help ensure that the company is marketed to a broad audience, increasing the likelihood of finding the right buyer. Confederation M&A maintains a buyer database with thousands of prospective buyers, including individual buyers, financial buyers, and strategic buyers.
  4. Valuation Expertise – M&A advisors have a deep understanding of the factors that influence the value of a business, and they can help business owners determine a fair market value for their company. This includes a thorough analysis of the company’s financial performance, industry trends, and comparable transactions. An M&A advisor can help business owners set a realistic asking price and negotiate a deal that maximizes the value of their company.
  5. Deal Structuring and Negotiation – Once a potential buyer has been identified, an M&A advisor can help structure the deal and negotiate the terms of the transaction. This includes developing a letter of intent, negotiating the purchase price and payment terms, and navigating any legal or regulatory issues that may arise during the sale process. An M&A advisor can help ensure that the deal is structured in a way that meets the needs of both the buyer and the seller and that the transaction is completed smoothly and efficiently.

It is never too early to have a discussion with an M&A advisor on selling your business. In fact, at least three years from the sale is ideal to be sure you are maximizing salability and your after-tax proceeds. From an advisor’s expertise and experience to access to buyers and valuation knowledge, an M&A advisor can help business owners navigate the complexities of the sale process and achieve a successful outcome


Peter MacSwain
peter.macswain@confederationgroup.ca

What is Alternative Minimum Tax?

As the name implies, alternative minimum tax (AMT) is an alternate way to calculate taxes to ensure that higher income earners pay a minimum amount of tax when benefiting from certain deductions, including the lifetime capital gains exemption (LCGE). Beginning January 1, 2024, there are new changes taking place that could impact your after-tax proceeds when selling your business.

At high-level, the following changes are proposed take place, as outlined in the 2023 federal budget:

AMT will still be eligible to be credited against high-rate income tax over the following seven years; however, it will be much more challenging to plan for some that are selling their business.

For Example:

For someone with income from other sources over $173,000 who then claims a $1M in exemption (LCGE per individual is expected to be greater than $1M in 2024), there will be approximately $80K in AMT plus approximately 1% for capital gains above the exemption, depending on your province.

Key Takeaway:

Depending on the structure of your business, you may want to consider getting a deal in place to sell your business before the end of the year to avoid triggering potentially high levels of AMT payable.



Peter MacSwain
peter.macswain@confederationgroup.ca

Mergers and acquisitions (M&A) can be a powerful growth strategy for companies looking to expand their market share, diversify their products or services, and increase profitability. By acquiring or merging with another company, a business can rapidly increase its scale and capabilities, and gain access to new markets, technologies, and resources. Here are some ways in which businesses can utilize M&A as a growth strategy:

  1. Expand Your Market Share – M&A can be an effective way to increase your market share and become a dominant player in your industry. By acquiring a competitor or merging with a complementary business, you can increase your customer base, distribution channels, and market reach.
  2. Diversify Your Products or Services – M&A can also be a way to diversify your products or services and reduce your dependence on a single product or market. By acquiring a company that offers complementary products or services, you can expand your offerings and create new revenue streams.
  3. Gain Access to New Technologies or Resources – M&A can be a way to gain access to new technologies, resources, or expertise that can help you stay competitive in your industry. By acquiring a company that has a strong technology platform or expertise in a particular area, you can enhance your capabilities and stay ahead of the competition.
  4. Achieve Cost Savings and Operational Synergies – M&A can also be a way to achieve cost savings and operational synergies. By combining operations with another company, you can eliminate duplicate costs, streamline processes, and improve efficiency.
  5. Enter New Markets – M&A can be a way to enter new markets or geographies that are difficult to penetrate through organic growth. By acquiring a company that has a strong presence in a particular market, you can gain access to its customer base, distribution channels, and local knowledge.

However, M&A also comes with risks and challenges, including integration issues, cultural differences, and financial considerations. It’s important to carefully evaluate the potential benefits and risks of any M&A transaction and to have a clear plan for integration and execution. Here are some tips for successfully utilizing M&A as a growth strategy:

  1. Conduct Thorough Due Diligence – Before entering into any M&A transaction, it’s important to conduct thorough due diligence to ensure that you are fully aware of the potential risks and opportunities. This includes financial, legal, tax, operational, and cultural due diligence.
  2. Develop a Clear Integration Plan – It’s important to have a clear plan for integrating the acquired company into your existing operations. This should include a timeline, milestones, and clear communication with all stakeholders.
  3. Address Corporate Cultural Differences – M&A transactions often involve bringing together companies with different cultures and ways of doing business. It’s important to address these differences and find ways to create a cohesive and productive team.
  4. Evaluate the Financial Implications – M&A transactions can be expensive and may have significant financial implications. It’s important to carefully evaluate the financial impact of any transaction and to have a clear plan for financing and capitalization.

In conclusion, M&A can be an effective growth strategy for businesses looking to expand their market share, diversify their products or services, and increase profitability. By carefully evaluating the potential benefits and risks and developing a clear plan for integration and execution, businesses can successfully utilize M&A to achieve their growth objectives.


Geoff Gross
geoff.gross@confederationgroup.ca

Selling a small to medium-sized private business can be a complex and challenging process, with many potential pitfalls along the way. In order to maximize business value and avoid common mistakes, it is important to approach the process carefully and with a clear strategy in mind.

Avoiding Common Mistakes

  1. Failing to Plan Ahead: Selling a business requires careful planning and preparation, and failing to plan ahead can lead to significant challenges and delays in the sales process. It is important to take the time to carefully consider all aspects of the sale, including financial statements, tax implications, legal considerations, and marketing strategies.
  2. Overvaluing the Business: Overvaluing a business can lead to unrealistic expectations, which can result in a longer sales process and fewer offers. It is important to be realistic about the value of the business and to work with a qualified M&A advisor to determine a fair and accurate value.
  3. Neglecting Due Diligence: Due diligence is a critical part of the sales process, and neglecting it can lead to unexpected surprises and delays. It is important to be transparent and forthcoming with potential buyers, and to provide them with all necessary information and documentation in a timely manner.
  4. Failing to Market the Business: Marketing is a key component of the sales process, and failing to effectively market the business can result in fewer offers and a lower sale price. It is important to work with a qualified M&A advisor to develop a comprehensive selling plan that reaches potential buyers through a variety of channels.
  5. Not Considering the Tax Implications: Taxes can have a significant impact on the sale of a business, and failing to consider the tax implications can result in unexpected expenses and lower net proceeds. It is important to work with a qualified tax advisor to understand the tax implications of the sale and to develop a strategy in advance of selling to minimize tax liability.

Maximizing Business Value

  1. Prepare Accurate Financial Information: Preparing accurate and detailed financial information is critical to demonstrating the value of the business to potential buyers.
  2. Focus on Growth Potential: Demonstrating the growth potential of the business is a key factor in maximizing its value. This can include highlighting new products or services, expanding into new markets, or leveraging new technology or trends.
  3. Build a Strong Management Team: A strong and capable management team is critical to the long-term success of the business, and can also increase its value to potential buyers. It is important to invest in training and development for key personnel and to build a deep bench of talent to ensure a smooth transition for new owners.
  4. Identify and Address Weaknesses: Identifying and addressing weaknesses in the business can help to increase its value and make it more attractive to potential buyers. This can include addressing operational inefficiencies, improving marketing and sales strategies, or investing in new technology or equipment.
  5. Work with a Qualified M&A Advisor: Working with a qualified M&A advisor can help to maximize the value of the business and ensure a smooth and successful sale process. An experienced advisor can provide valuable guidance and support throughout the sales process, from valuation to marketing to negotiations and closing.

Selling a small to medium sized private business can be a complex and challenging process, but by avoiding common mistakes and focusing on maximizing business value, it is possible to achieve a successful outcome. It is important to approach the process with a clear strategy in mind, clear expectations and to work with qualified professionals to ensure a smooth and successful sale.



Charles Ackerman
charles.ackerman@confederationgroup.ca