In November 2017 Bruce Hogan, the (former) CEO of Leading Edge Geomatics, along with his business partners Bill Kidman and Will Lowry, sold a majority stake in their business to Novacap, one of Canada’s leading private equity firms. We had the great opportunity of representing Leading Edge Geomatics through the transaction, which involved a competitive process ending with over 10 offers on the table for consideration.
The three company founders – Bruce, Bill and Will (who remain shareholders in the company today) – started their careers in geomatics while working with the Canadian Forces. After retiring from the military, they saw there was a significant opportunity for the LiDAR (Light Detection and Ranging) technology that they were using in the military to be used for commercial applications and thus, Leading Edge Geomatics was launched in 2008.
Leading Edge Geomatics is a New Brunswick-based leader in airborne imagery, LiDAR acquisition and data processing. The company owns and operates its fleet of aircrafts which are used for LiDAR data collection across various industries. While the data collection using the aircraft fleet is a key aspect of the business, the companies ‘bread and butter’ is what it does with that data to turn it into useful information for the end-user. The company has developed powerful applications that help organizations in the private and public sector map, monitor and manage their key assets.
Confederation M&A partners Jeff MacKenzie and Bob Brown sat down for a chat with Bruce Hogan, founder/former CEO of Leading Edge Geomatics and current board member, to discuss their decision to sell when they did and life since the transition…
Bob: Let’s start with the decision to sell. You started Leading Edge in 2008 and sold in 2017 – only 10 years later. Still relatively young in the company’s history. What led you to your decision to sell when you did?
Bruce: It wasn’t that we [Bill, Will and Bruce] were looking to get out and retire, we just thought that the timing was right. We realized that although we were growing quickly, we were basically only servicing around 2% of a $4 Billion dollar market. We knew if we wanted to be a major player in this industry and take this company to the next level, we needed to bring in some back-up. It takes heavy investment in capital expenses to grow this business – planes and LiDAR sensors are not cheap! So, we knew having a partner or major investor who could take away some of the capital constraints would help us launch to the next phase of growth. It really came down to us feeling like the best way to build the business to be a bigger, better, and more successful business was to bring on a strategic investment partner.
Jeff: It’s now been a couple years since the sale – have you grown like you thought you would?
Bruce: It’s been good so far and we’re still growing. At the time we sold at the end of 2017, we were around 40 employees with a fleet of 4 planes. In the two years since the sale, we essentially doubled the size of the company. We’re up to up to 85-90 employees, we own or lease 9 planes, and continue to increase our sales each year.
Bob: You are still a part-owner in the company and you stayed on for a period of time after the sale in your CEO role before you stepped back. Tell us a bit about how the transition went and what some of the challenges were.
Bruce: Well, you guys know from the start I made my expectation clear that I would stay on for a period of time in the CEO role, but that I would be looking to step away from that role in the next year or two. We initially agreed to a year, but it ended up taking a little longer to identify the right CEO and CFO to step in. It ended up being about 20 months in the CEO role before I was able to step to my current role on the Board of Directors, but that was alright. Seeing as I’m still an owner in the company, it was important to wait to find the right people for the roles.
Jeff: Can you tell us about your efforts to sell on your own and what finally led you engaging with an advisor.
Bruce: Prior to engaging Confederation M&A, we went down the path for about a year with a strategic buyer. That was a bit of a nightmare. I spent the better part of nine months trying to go through a very extensive due diligence process with the potential buyer before it ended up falling apart. The worst part was I was spending 10 hours a day trying to manage the process on my own and it took me away from the day-to-day business, which is where my focus should have been. I needed to get back to focusing on running and growing the business.
Bob: After Novacap was selected to be the preferred partner, we spent about 90 days give or take working through the due diligence process and finalizing the sale. Due diligence can be an extensive process and there are always going to be some challenges. Can you speak to what some of those challenges were?
Bruce: Issues are going to arise through due diligence – it’s inevitable. During our process, one thing that sticks out is I remember we ran into some disagreements in the final weeks about working capital. Without getting into details, we ran into a difference of opinion on what the working capital would be which we realized was going to cost us more money than we expected. In the final stages of the transaction, everyone’s emotions can be running a bit high so at the time, it was something that was bothering me. I remember being in my car driving back from Montreal to Fredericton and taking some time to reflect on the situation. In our case, we were remaining on as part-owners so it was really in our interest to make sure we were leaving a healthy amount of working capital in the company at closing. So, we ended up reaching an agreement on that and moved on. But, if we were not flexible, it could have easily become a much bigger issue and could have potentially de-railed the deal.
Jeff: After now successfully going through the process, what advice would you have for any future sellers?
Bruce: My advice to any business owners going through the process would be to not let your emotions get in the way and make sure to take a step back every now and then to look at the bigger picture. If you are still able to accomplish the goal of what you set out to do, then make sure you don’t kill a deal over some issues that may be minor in the grand scheme of things. The other thing I’d mention is before going to market, make sure you have your house in order. Spend the time making sure your organization’s policy documents are updated, your financials are clean, and have information as organized as possible to make it as easy when it comes time for the due diligence review.
Bob: You don’t seem to be the type to fully retire, so now that you have transitioned out of the CEO role how are things going?
Bruce: We worked hard for many years in the military before we started Leading Edge Geomatics and then worked very hard to make Leading Edge a successful company. With that comes many sacrifices – the most obvious being family. Now that I have stepped away, I do not see myself being fully retired. I am involved with other business ventures and still busy but now I get to control my time better. I can be more flexible and it gives me more time to spend with my family. My wife gets to see many of the places she missed when I was away working.
Jeff: Any final thoughts for someone looking to sell their business?
Bruce: My advice to anyone thinking about selling would be that it’s not a do-it-yourself project. You don’t do your own legal work, you don’t do your own accounting work, so don’t try to do mergers and acquisitions on your own either. Hire a professional advisor who knows what they are doing and spend that time focused on growing your own business.
Lastly, when things get tough and it seems as though the sale is in jeopardy, always refer back to your original plan, stay focused on the big picture, expect some challenges and be willing to compromise in order to meet the original objective, selling!