- page 11

11
DECEMBER 2016
«
The Canadian Business Journal
“Everywhere we go, when someone hears
about our model and approach it always puts
a lightbulb on in their head that ours is a bold
type of approach that nobody else is doing. This
model would appeal universally,” says Padda.
The primary targeted investment equity
range tends to run between $20 million and
$200 million because that is where the vast
majority of companies’ financial statements sit
before considering a selloff to a large consoli-
dator. However, Reid points out there are also a
plethora of smaller companies with a valuation
of $5 million – and less – that also can be per-
fect for this type of business model. Much of the
consideration depends on where the investment
banking community and accounting firms view
the company.
“For every 100 businesses with EBITDAs
(Earnings Before Interest, Taxes, Depreciation and
Amortization) between $5 million and $25, there
will be only 15 EBITDAs between $25 million and
$100 million and about five that are north of that.
It’s the smaller businesses that drive the whole
economy,” says Reid.
The remarkably unique model created by FA
Capital seems to be gaining the most traction in
businesses where people have to constantly per-
form at a high level. The three main categories
that have been identified to date are health-
care services, franchises and business services.
“Healthcare because the people who run those
businesses often went to school for a long time
for a reason; they are caregivers first and busi-
nesspeople second,” explains Reid.
FA Capital understands that private equity
has a fundamental responsibility to provide the
biggest and fastest return possible. But that is
most often a bad partnership for people who are
sensitive to the reputation of what they do for
a living – and that’s exactly the type of business
that FA Capital looks to partner with; successful
people who care.
“We think that there is a right way to do busi-
ness and that includes the concepts of fairness,
honesty and transparency. You can do that when
your partners are all aligned on the same page
and still obtain attractive economic returns,”
states Padda.
All partnerships with FA Capital are with pri-
vately-owned entities and in fact most tend to be
founder-owned. Reid and his team will typically
make one investment for about every 40 poten-
tial investments that are put in front of them for
assessment. If they are interested in proceeding
FA Capital will integrate into workplace envi-
ronment to gain a feel for the company being
assessed and how it is operated.
“We don’t look at ‘A-minus’ or ‘B’ companies.
We look at ‘A’ companies only. After that, what
makes an ‘A’ company good or bad for us is mostly
about the culture and the people,” Reid says.
Founders Advantage Capital deals with
about 1,000 investment bankers who can offer
sound advice rather than those who just want
to make the sale as fast as possible. When those
investment bankers reach out to FA Capital
they provide detailed information about a com-
pany that is in the midst of exploring its various
1...,2,3,4,5,6,7,8,9,10 12,13,14,15,16
Powered by FlippingBook