New growth fund aims to fund mid-size businesses

Canadian Business Growth Fund has a $545 million war chest and has made its first investment in Kelowna, B.C.

By
Western Investor
November 8, 2018





cbgf
Part of the CBGF team. | Submitted

 

A newly minted and well-funded business growth investment fund has chosen a retail expansion out of Kelowna as its first Canadian play.

The Canadian Business Growth Fund (CBGF) announced that it has completed its first deal with a $15 million investment in Lift Auto Group, of Kelowna, a consolidator of automotive collision repair centres. Lift, which has six locations in B.C. and Alberta, plans to use the investment to further expand its footprint across Western Canada.

CBGF was launched in June to help fix Canada’s growth capital gap by providing high-growth mid-market Canadian companies with the patient, long-term, minority capital they need to scale, according to CEO George Rossolatos.

CBGF seeks to invest between $3 million and $20 million in mid-market companies with $5 million or more in annual revenue, a demonstrated growth trajectory, and a clear vision for accelerated growth.

CBGF is independent but is backed and was created by 13 major lenders in Canada. The fund represents all the Big Six banks, plus HSBC, Laurentian, Canadian Western and others including large insurance companies, Rossolatos said. 

An evergreen investment fund with capital commitments of $545 million, CBGF is committed to long-term partnerships in the companies it invests in, he explained.

“As an evergreen fund, CBGF technically doesn’t have fixed end dates,” Rossolatos said, unlike most business growth funds that sunset after five or 10 years. “We invest for the long haul.”

CBGF does not advance loans. Instead it takes a minority equity stake in a company of up to 40 per cent. “But we want the entrepreneur to remain in control and in charge of the company.

“We have a say, in effect a board seat, and work with the owner in making bigger decisions, but it is their play. We are here to support them.”

CBGF has experts on staff, often related to specific businesses, who can provide timely advice, he said. 

“We are an investment partner. Our capital is projected to grow to $1 billion and we want to invest in Canadian companies to help them grow,” he said.

Rossolatos said a common problem with Canadian companies is that they scale up but then sell the company before it reaches its full potential. “We are patient.   We want the company to keep growing, keep acquiring.”

The CBGF has proven a good fit for Lift.

“Our partnership with CBGF will provide us with the long-term, patient capital we need to embark on our next phase of growth while still retaining control of our business,” said Lift president Mark Reineking. “Strategic and cultural alignment is a priority for us, and we believe the common values shared by both parties will serve as the basis for a strong and successful relationship, allowing us to maximize value for our stakeholders and the communities in which we invest.”

The opportunity was introduced to CBGF by AltaCorp Capital, which acted as Lift’s advisers in raising growth capital to execute its growth strategy. It took about six weeks for the deal to come together.

Rossolatos noted it was not a surprise that a western company would be the first to partner with CBFG.

“Our mandate is nationwide but we are seeing a lot of entrepreneurial activity in Western Canada. We see several opportunities that we are serious about in the West,” he said. Kelowna in particular is “an entrepreneurial hot spot,” he added.

While confidentiality agreements restrict discussion of specific companies with which CBGF is in negotiations, Rossolatos said “we are working on dozens of opportunities across Canada and many of them are in the West. Any of these could be our next investment.”

CBGF is not interested in financing direct real estate development or resource plays and also shies away from marijuana businesses. 

“We are not interested in the cannabis industry,” Rossolatos said.


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