This Business Is a License to Print Money

0:00Hello, everyone, and welcome back to another episode of Acquisitions Anonymous. My name is Bill D 'Alessandro, and this is the internet's number one podcast on buying, selling, and operating small businesses. I'm here today with my co-hosts, Michael Girdley, Heather Anderson, and Josh Tonneson. Gird's found a really interesting business today. I called it a license to print money. It is a heavy equipment dealership in Western Canada. It has$9 million of EBITDA has been growing at a 26 % CAGR. we are kind of shocked this business is for sale. So we dig into that, talk about why we like it, some risks, how you might do this deal.

0:40This was a really fun one, a great business that we found. So without further ado, enjoy this episode of Acquisitions Anonymous. We'll start Acquisitions Anonymous. Hello, another episode of Acquisitions Anonymous. We don't have 100 % ears anymore. And thumbs downing on just the plus inventory. Hey everyone, it's Bill. And I want to tell you about maybe the most exciting sponsor we've had in a long time on the pod. It's called Capital Pad. And it is the thing that I wish existed when I started my journey of operating and investing in small businesses. So Capital Pad is a marketplace for acquisition entrepreneurs.

1:18That is people who want to buy a business and need capital to list their deals and solicit capital from other people who want to invest in acquisition deals. So if you want to back somebody buying a small business, Capital Pad is the place to do it. And if you want to buy a business and need capital, you can go on Capital Pad to be introduced to investors. So the really great thing too from the investor side is that Capital Pad takes care of all of the details that can get hairy with small business acquisitions. They handle standardized terms, standardized governance, standardized distributions, all up front in black and white.

1:58Basically, Capital Pad professionalizes investing in small businesses. And the returns can be really, really good. I'm so stoked they exist. It's founded by my friend Travis, who is a phenomenal entrepreneur in his own right. So if this sounds like something that's appealing to you, if you want to buy a small business and need capital, or if you want to invest in small businesses, go check out capitalpad.com and tell them that Acquisitions Anonymous sent you. All right. Welcome back to Acquisitions Anonymous. This is a coffee episode. It is 8 a.m. Pacific time, 11 a.m. Eastern. So the Eastern crew here is me, Bill D 'Alessandro, Michael Girdley, Josh Tonneson from Tonneson Accounting Services, and the West Coast crew, Heather Anderson from VisoCap.

2:42Good morning, everybody. Good morning. Good morning. Girdly is hitting us blind with this deal. So you're going to get live reaction from everybody. Caffeinated live reaction. That's fine because I found it three minutes ago. So it should be great. But it's a fascinating part of the business and I kind of wonder why it's on the market. So that's why I was like, oh, we should do this one. But before we do that, Josh, do you want to give everybody just a quick 30 seconds on who you are and what you do? Sure. Yeah, I'm Josh Tennyson. I own and operate Tennyson Accounting Services. We specialize in quality of earnings reports for people buying small businesses.

3:18We do around 25 to 30 engagements a month. Again, usually for SBA-sized deals. A lot of times for first-time buyers. So if you want to reach out, feel free to hit me on LinkedIn. Or you can look up our website at tonnisonaccountingservices.com. So would you say you've seen a lot of small businesses, Josh? We've seen, I've done over 300 engagements. So quite a bit, yeah. What percentage of deals that you look at? So you're doing 25 a month. So that's whatever times 12, 300 a year, right? What percentage of deals have material falsehoods in the seller materials presented? Yeah, I posted something on LinkedIn a couple, maybe two months ago or something with that.

3:57So my numbers might be off a little bit, but it's over half of them have some kind of material. And a lot of times it's like 30 % off or so, some type of material misstatement. And I think it was like 14 % of the time or something like that. They actually understated it. they've missed an ad back or something like that. But yeah, it's more often than not. A lot of times you have people using maybe cash-based stuff that'll really mess up what the business actually earns, right? Or they forget to add back, like gain-loss accounts and stuff that don't really impact operations. So it's a wide variety of things we see.

4:30What percentage of those do you think are intentionally misleading? I'd say some other quality of earnings providers might use the word fraud a little bit more than I do. I think typically they don't actually mean to mess it up. I mean, for the broker, like you don't want the deal to die, right? Sometimes you want to have somebody, like you just want more interest in it, right? But if I'm a broker, I want a nice, honest deal. That way I have a higher close rate and I don't waste all this time with deals dying. And a lot of times the sellers don't really know what's going on with their business too.

5:01So I would say it's largely, maybe you could say negligence a little bit, but it's very rarely anything intentional. So the only thing that I say maybe is somewhat a little intentional is like sometimes they sell it a little much. Like if they do have a very contract heavy business and they lost a large client, right, they should really disclose that and recast their prior periods if you're not going to be able to replace that with somebody. But most of the other stuff is just kind of bad math I've seen. So, yeah. Awesome. Well, kudos to you for not being like cynical. We'll see if you will check in next year and see if you get that way.

5:34Yeah. All right. So let me pitch you guys on this deal because this deal kind of confuses me, but I think it's super interesting for a number of reasons. So it is a heavy equipment dealer located in Western Canada. Heather, this is your chance to think about that horse farm you've always wanted to own just outside Vancouver, one hour to skiing, one hour to the beach. You know what I'm talking about. So let's dig in. So the company is a well-known industrial equipment dealer that provides equipment sales, repair, rental, transport, fabrication, and finance services. The company is an authorized dealer for Western Canada for a recognized international heavy equipment manufacturers.

6:16The product line includes crushing, screening, conveyors, feeders, trommels, and shredding equipment, as well as wash plants. The company sells and rents to companies involved in the crushing, topsoil, compost screening, C &D waste and recycling, construction and demolition, road maintenance, landscaping, forestry, and oilfield reclamation. It also sells and rents to cities and municipalities. As the preeminent dealer in the region, the company serves over 700 active accounts with an 84 % rate of repeat business. In 2025, net sales were an estimated$34 million, and they did an EBITDA of$9.2 million.

6:53dollars. Their growth rate has been going up and to the right. In 2022, they did 18 million, 2023, 27 million, 2024, 30 million, 2025, 34 million. And they estimate that they will keep growing about 10 % per year. Revenue sources are relatively straight up split. So a little over half is equipment sales. Then they do equipment rental, which is another 30 % or so. And then the remainder is parts and what is that last word freight is that what that says bill great yeah freight weird okay well i don't know how they're getting freight but we'll come back to that um so uh where where'd the deal go on the screen here okay now here it is um besides equipment sales rental repair the company also provides transport services with a fleet of five tractor units and a variety of different trailers in-house financing services and a fabrication shop.

7:46So I guess, Bill, these five tractor units are them getting paid to move equipment around for people. Yeah, they're delivering the equipment that you rented or bought from them. Yeah. Over 700 customers, the largest account is 12 % of total sales, so they don't have customer concentration according to them. They have a complete management team, including a sales manager, general manager, parts manager, service manager, and comptroller, and will provide the necessary experience and continuity for new ownership. It has a 14 ,000 square foot office and shop a 10 ,000 square foot parts warehouse and they're near a major city and adequate for near-term expansion.

8:20The company also has an eight and a half acre storage yard, a 8 ,400 square foot satellite shop and the company's equipment inventory tractors and trailers had a net book value of$27.53 million as of its recent fiscal year end. And we can look at where this general equity managing director is who may be able to tell us more closely which city this is because there's only like three major cities in Western Canada, so you got to pick one. I will almost guarantee you it's in Saskatchewan, in Saskatoon. If I had to guess. It's a major agricultural center. I know this because one of our suppliers is there.

9:02So they grow a ton of flax. They grow a ton of grain there. There's a lot of farming in Saskatchewan, believe it or not, even though it's very cold. it's like the agricultural center of Canada and also it's like the only thing between Eastern and Western Canada so this is either in Vancouver like on the very far coast because they said Western Canada or it's in Saskatoon, Saskatchewan if I had to guess what about like Calgary is Calgary and Edmonton they're in Alberta are they considered Western Canada or Central Canada? I don't know if that would be is that like Central Canada? Exposing my Canadian geography a little bit.

9:42Do they have a Midwest? Midwestern Canada? I have no idea. I looked up Ted Rattenberry. He's in Vancouver. He's in Western Canada. Super Western Canada. Okay. So this is a, it's probably not Caterpillar, but it's something like that. It's a dealer for a heavy equipment brand, right? Covering a region in Western Canada. Yep. these are in the United States, at least known to be some of the best licenses to print money that you can own, especially Caterpillar, but even other ones, um, is these heavy equipment dealers, because they're typically in the United States, territory protected, which means it's a monopoly.

10:26And, you know, you have the dealership from Caterpillar for this area and any economic activity that needs Caterpillar equipment in your area comes to you, runs through you. And it's a great, I mean, some of the wealthiest people in North Carolina are the Caterpillar people. It's unbelievable. And they, you know, they're multi-generational businesses. It is a literal license to print money. I'm fascinated that this is for sale. So, so humorous anecdote for you guys. So for a while, the Caterpillar dealer that's located here in San Antonio, who also, by the way, owns the Spurs, our NBA team, to your point, Bill.

11:03There you go. Point reinforced. so they uh they would routinely host the national gathering for all the caterpillar dealers and i would kind of find out where it was as an airplane nerd and just it was like private jet private jet private jet private jet like they would all stream in on the same day and then they would all like a hundred private jets would all stream out on the same day uh when they would have their annual gathering here just license to print money when you have one of these things which is why it's fascinating that it's for sale. Yeah. Right. That someone, they didn't try to sell it within the network already.

11:36That whoever has the territory nearby, it didn't buy it. That's my first inclination or my first question. And then there is risk, obviously, because you need to know how solid and how transferable that dealership agreement is to somebody else because you're 100 % dependent on maintaining yourself as the only dealer in that territory. And I noticed something that they said, I thought it was interesting about the inventory, how much inventory was on the balance sheet. I typically see with distributors that they don't own the inventory, that they do use something like a flooring line of credit to sort of finance the inventory, because it's very expensive to carry, you know, these kinds of heavy equipment pieces on your floor, so to speak.

12:24And so there's these flooring lines that make it a little more cost effective for them. So that would be one of my first questions is how does that work? Are you, is this company actually having to buy the inventory from the manufacturer and hold it until sale? And, you know, that just changes the working capital component a lot if they do have to do that. Well, they've got$27.5 million worth of inventory tracks and trailers on their books. So that's what they say here. But I've seen that said in teasers before. But when you ask some questions, you find out that it's not actually owned. It's on a flooring line.

13:01So that's why I ask the questions. It's sometimes stated in a way that you think they own it, but they don't. Yeah, they say net book value. So they're definitely saying that it's like, you know, you take the asset and the net free, but they sometimes don't know what net book value means. So I agree 100%. Well, they do have a rental fleet, right? So the rental fleet, in theory, that's going to be owned equipment that they would have on their books. That's probably what it is. Good point. That's the stuff they rent out. I mean, do we think this is kind of one of the also-rand brands? Probably. I mean, if you go look around, there's the two or three that really matter.

13:46There's Cat, Case, and then John Deere, and then you work your way down, and there's like random Chinese brand, random Indian brand. That's kind of where my mind goes on this. I wonder if these guys are not attached to one of the winning dealership networks and dealership manufacturers. Well, let's define winning. They're making$9 million of EBITDA. And they've grown every year. I mean, they have a 26 % sales CAGR over the last three years. It'd be$9 million. That's a barely profitable bill. I mean, yes, I agree. It's probably not Caterpillar, right? Because those are so rare. But this is a great business.

14:26I mean, it's objectively a great business. I mean, look at the financials, right? It's up and to the right. It goes$19 million in 2022,$27.8 million in 2023,$30 million in 2024,$34 million in 2025. I mean, it's up and to the right. The margins are great. The margins are 30 % EBITDA margin. It has a contract monopoly. I mean, what's not to love? If it's not one of those established brands and it is the off-brand, I think maybe the other risk to think about would be how well has that other brand protected their dealers you know how solid are these dealerships actually uh long-term word caterpillar we you know they're very very solid maybe with the off-brand they're not as as good yeah i mean your your contract with your brand your dealership license is the whole business here yeah you know yeah is it transferable you know are if you screw up how quickly can they take it from you you know that's the risk like you buy this thing, you footfall and stumble and they yank your dealer license and now you're zero.

15:31Are you ready to take a leap into business ownership, but you don't know where to start? Well, look no further than Acquisition Lab, the premier resource for entrepreneurs seeking to buy their dream business. Founded by Harvard MBA and acquisition expert, Walker Dybal, the lab is your fast track to success in the search diligence and acquisition process. With hands-on support, world-class resources, and a community of like-minded entrepreneurs acquisition lab gives you the tools and confidence to navigate every step of the journey and we're proud to call walker and chelsea the labs director long-time friends of the podcast they're passionate about helping entrepreneurs like you take the next big step so don't wait to make your business ownership dream a reality visit acquisitionlab.com today to learn more and schedule your free consultation and when you do be sure to tell them the acquisitions anonymous podcast sent you uh i mean there's also the issue that this isn't canada which is a foreign country i know i give it my california and it's real cold up there y 'all dude it's next door to whistler though ski area just saying beautiful yeah but yeah i mean that's the other part about this is there's that may be part of the part of the reason it hasn't been rolled up is you know the u.s manufacturer the u.s you know owners of these things the other the other dealers may just not want to take on the headache of owning a division up in Canada.

16:51It's different. Everything's different. Employment laws, financing, it's all just different. Could be it. But man, yeah, it's cold there and you probably got to live there. Maybe you could run this absentee. Maybe. This has got a full staff. It's big enough. It's$9 million at EBITDA. You can afford a real management team on site here. This is a killer add-on, of course, for anybody who's in this. So I am going to give you, I'm going to give you a different take on where this is. It may not be in Saskatchewan. It may be in Edmonton. Because Edmonton is basically the oil capital and Calgary is like the little baby brother of Edmonton in terms of oil.

17:33But that is the, those are the two markets that are huge. And the thing that gets me here is it says forestry and oil field reclamation. And once you go out West, as I understand it, deep British Columbia doesn't have oil field stuff going on, but they sure do in Alberta. And they also have forestry because you're right on the edge of the Rockies. So it makes me wonder if this is actually up in Edmonton. You're probably right. You're probably right. This is Edmonton. Or Calgary. Somewhere in there. Calgary is really nice. I have friends that live there and it's a good place to be. You're right next to Banff.

18:10If you notice, everything for me is how closer to you than your ski resort and it's right next to Banff. Yeah. Banff is awesome. If, if you're listening, I've never been to Banff. It's a wonderful place to visit. So cool. Yeah. I mean, the awesome thing about it, sorry, I'm about the ski nerd on you, but the awesome thing about Banff is the altitude is actually really low. So you don't get altitude sickness like you do in places in Colorado. So, uh, it's only like a 2 ,500 feet elevation. Yeah. And it's very dramatic too. Uh, uh lake louise is in banff right uh there is a fairmont hotel like on lake louise which is the most incredible hotel i have ever been to like it looks out over the lake and there's massive mountains behind it you can go in summer winter go for a hike it's so cool anyway so digression so maybe i like this even more now it's a license for money and it's near banff so josh i'm an american buyer and i'm looking at this how do i make sure i don't get myself in trouble from a financial standpoint?

19:08So when I see this deal, I think of a couple things. One of them, it's a larger deal. So you hope to have a little bit better data than some of the smaller deals do. You see that they have the breakouts already between their different product types. So you have the rental, the sales, the parts and the freight. Just thinking through that a little bit, the equipment sales, they, and I'm making this up, I have no clue, right, what they make, but I would think your margins might be like, we'll say 15 to 25%, maybe, obviously, depending on what the relationship is with whoever's the manufacturer of them.

19:39But then a lot of times your parts actually have a much higher margin too. So there's an aspect of like how they've been growing, where it's like if they sold a lot of equipment in the past five years, well, now you have this snowball effect where you're going to be able to go and now sell more parts when they need to fix them up a little bit. Freight, sometimes people and companies do a good job of charging margin on freight, sometimes not as much, right? So if they don't charge a margin on freight, That could make sense as an opportunity there. And then one other thing I thought was odd is I don't see any service type aspect either of this.

20:11So you think with these machinery or with these machines that you're selling, they are going to break down. I'm sure there's some warranty and stuff. But even past that extended warranty period, you would think there'd be some kind of service department with the volume that they're selling that they'll be able to go and assist them with fixing them up. I think this is a great business. I mean, what do you guys think this goes for? So like let's, it's 9 million bucks of EBITDA. So it's scaled, it's growing. It is, so that's all great. It's a legal monopoly. On the flip side, it's got$27 million of hard assets.

20:49Let's say for a minute, those are really owned equipment, right? It's not some lease mistake or whatever. That's working capital that is tied up. And let's assume also that that's fully depreciated. value for a minute, or not fully, but partially appropriately depreciated value for a minute. How do you guys value this thing? There are a lot, I mean, there are a lot of transaction, you know, data sets on what different dealership networks are trading for, everything from Nissan to those cats, like there's people who have that data. So I haven't seen any of it lately, but it wouldn't surprise me if this trades for like six or seven times EBITDA plus the market value of all the assets.

21:33Wow. Like a lot. So I don't know, maybe I'm being too, I'm being bizarro gridly today and pricing something way too high, but it feels like something like this is going to trade big time, big time number. And it's being listed by generation. Oh, now it's generational equity. The last time it was generational proof, wasn't it? But anyway, which is a little surprising because that number you just shared would be like 70 to 80, well, 70 to 90 million. Right? Yeah, I think this is probably pushing a$100 million deal. Right, but it's being listed by generational equity, which is just a little strange to me.

22:15It's way out of hand. Yeah. Well, it's weird. The guy that's listing it is not a generational equity guy. It's this Ted Rattenberry from BusinessX Business Exchange Limited, which is in which is in Vancouver. So it seems to be an affiliated brokerage in Canada. Okay. I mean, this is a big get for generational equity or even an independent broker. I mean, it's a$100 million deal. Yeah. I think my very first question to the broker when I talk to him is like, why haven't any of the other dealers bought this deal? Like, why is this being mass marketed? I don't understand. And curious what they say.

22:59Me too. It's too good a business and there's too many obvious strategic buyers. It's like seeing a Toyota dealership on Biz Buy Sell and you're like, what? This makes no sense. These don't trade on Biz Buy Sell. But man, if you call the broker and he's got some good reason, maybe the other dealers aren't allowed to buy it because the brand has concentration requirements and they want everybody to own one territory only and you know it's something like that and you're bidding on this and there's not 27 private equity firms also bidding on it i mean this could be one of those things like the way you you do really great in in small business acquisition often is when you've got somebody hires the wrong intermediary right like this business probably should have hired like a real investment bank who was going to shop at far and wide but like if they hire the wrong intermediary and you get a generational equity price on a Goldman Sachs asset, you could do great here.

24:00This is proprietary sourcing. You found a diamond under a rock, potentially, potentially. So it's worth a phone call to the broker. Can you buy this if you're not Canadian? Maybe. I don't know. Screw it. I'm sending it to my Canadian friend. I'll let you know what it says. I probably could. You know, we've done some international deals on the show before, and it's always like we just can't get comfortable with it, you know, in Brazil or in Mexico or whatever. But, you know, Canada is a first world economy. They have established property rights. You know, they have a structured legal system. They have established banking and capital markets.

24:38Like, I think you probably could do it. I don't know how to do it. You need a lawyer that knows how to do it, but I think you could do it. This is a huge Trump pissing off Canada beneficiary business because the entirety of Canada is super motivated to deintegrate from the United States. They feel very burned and hurt, elbows up, all that kind of stuff. And they are spending a ton of money to build roads, to integrate all the provinces. That's got to help this, for sure. I love it. It's an American brand, though, Bird. Yeah. you know what if it's an american brand of stuff oh yeah i mean if this is john deere well then you just put john deere comma a next to it all right i texted it to my friend and i wrote the following text here's the link and i wrote friend comma we should buy this so i'll let you know what he says i'm into it yeah copyright is important with your texts you write stuff like that even if you only kind of half mean it to really get them motivated to dig in.

25:45So we'll see. He's the type of guy to get angry about a text like that. So we'll see what happens. I like it. I want to invest. If it is what I think it is, it's a license to print money. He's already in the Alberta area. There you go. And he's Canadian. Does he have$100 million? Because that's what we're going to need. He may not. He might know other people. He knows some people. All right. I love this one. Good find. Two good finds back to back for Girdley from generational equity. Josh, would you do quality of earnings on a Canadian business or do we have to find a fake Canadian quality of earnings firm?

26:26I'll say the vast majority of our deals are US-based. I have done Canadian and even some other overseas deals. Obviously, I'm not as familiar with their tax returns and I don't speak a lot or any really foreign languages, but sometimes people still want me to look at the numbers and stuff. So we kind of take it on a case by case scenario. Canada doesn't scare me as much as something that's obviously another language. So yeah, I like it. All right. If you like this one, we have 400 more like it. I don't, I did mention we did another dealer, you know, a long time ago, I think. But there are whatever niche you're into, we've got an episode on it on ACQU and on.com.

26:59You can also get on our email list. We will email you written summaries of the episodes. If you're not always an audio person, but want to keep up on businesses we're reviewing. You get text-based summaries of the episodes on our email list, acquanon.com. Thanks for joining us. Josh, where can people find you on the internet? Yeah, reach out to me on LinkedIn, or you can look up my website, tannisonaccountingservices.com. We have a contact form. Fill that out. I'll reply back to you normally, same or next day. Awesome. And Heather, I don't think you're this little bit above SBA size, but if people have an SBA size deal, where can they find you?

27:32And you can't get an SBA loan in Canada either, but I'm at visocap.net, V-I-S-O-C-A-P.net. Sign up for our Tuesday webinar and get started with us if you're going to use an SBA loan to acquire a business. Awesome. Well, thanks for listening, and we will see you on the next episode of Acquisitions Anonymous.