Personalizing Succession: Lynx Equity Limited’s Human-Centric Approach
March 21, 2024
Brad Nathan, the driving force behind Lynx Equity Limited, brings a refreshingly personal approach to the often impersonal world of business succession planning, in his interview with CanadianSME Small Business Magazine. His entrepreneurial journey, marked by early lessons in outsourcing and a passion for small business impact, culminated in the founding of Lynx Equity Limited. This firm stands apart for its dedication to the small to medium market, focusing on creating seamless transitions for retiring business owners. Nathan’s philosophy that “business is personal” shapes every deal, ensuring that the legacy of business founders is honored and their life’s work continues to contribute to the economy. By treating businesses as communities of people rather than mere transactions, Brad and his team at Lynx Equity Limited have mastered the art of human-centric succession planning. This approach not only facilitates smoother transitions but also strengthens the fabric of the business community, making Lynx Equity Limited a beacon of integrity and empathy in the business world.
Brad, could you share more about your journey leading to the establishment of Lynx Equity Limited’s unique approach to succession planning, particularly focusing on the small to medium market? How do you incorporate the personal stake of an SME into the strategies and goals you set for your clients and their companies?
I was always entrepreneurial. I remember, when I was very young, collecting $51.00 from the Toronto Star for delivering the paper. I was proud of myself, and I recall telling my parents, “I don’t need to go to school anymore”; because of the money I was making, and they laughed and said, “Well, you have to give $49.00 of it back to the Toronto Star for the papers.” And I quickly realized at this young age that maybe my dad could do the deliveries for me – I guess I had learned how to outsource and I also realized that I didn’t want to work for anyone else. That was a guiding point for me as I eventually became a CPA and completed my MBA in International Studies and Finance. During which I learned that I liked working with small businesses because I felt it was an area in business where you could make a real difference.
I went into venture capital and while I saw the whole world investing in the dot com space (with no revenue), I also saw a whole market of people looking to sell their businesses and retire and it was an area that no one was paying attention to. I decided that I wanted to pay attention to them, and take a different approach than what the business world was used to at the time. I decided to take a friendly approach to business, put my arm around the sellers, working out ways to create win-win situations, making sure that everyone involved was happy with the business environment that was created. This gave birth to Lynx Equity Limited.
What we’ve seen over the years is how the small and medium-market has been able to flourish and contribute to the greater Canadian economy. Despite many economic shifts that have happened over the years, it’s been wonderful to support and foster this wave since 2007.
When we look at how we approach these businesses – we have to always remember that businesses are people first, and they likely built the businesses with a lot of blood, sweat and tears. We can’t approach them the same way a billion dollar corporation headquartered in a busy city centre would. Buyers have to be very personal in the approach that they take with these companies, and that is what we specialize in at Lynx Equity Limited. We’ve spent years cultivating the craft to ensure we are always meeting the needs of the sellers first, which requires consistently considering the human aspect of the business first.
What are some of the most common hurdles you’ve encountered in succession planning for SMEs? How does Lynx Equity Limited work to overcome these challenges?
The most common hurdles that we’ve faced when buying businesses is threefold:
- The readiness of the seller: While it’s often not easy for sellers to give up the reins of their businesses to potential buyers for a number of reasons, having a clear transition plan is critical in their readiness to sell.
- The valuation gaps: It’s important that the seller and the buyer align on the value of the company through a critical analysis process. The two parties ultimately have to agree on what the value of the business truly is in order for a fair and successful transaction to be made possible. Without that gap minimization, there is no way a transaction can take place. I’ve seen buyers hold out and miss an excellent opportunity and I’ve seen sellers hold out for an unreasonable sale price only to have the business go downhill after a failed sale. Of course, in all fairness, after seeing so many deal opportunities, I’ve seen things go in opposite directions, too.
- Deal terms confidence: Oftentimes, the seller has a difficult time grasping that they won’t get the entire amount of money for their business upon closing. They need to understand and be comfortable with the terms of the deal, ultimately being able to trust the buyer to pay the seller note over time.
From a Lynx perspective, how we've overcome the above hurdles are:
- We’ve typically shied away from businesses where there’s no clear succession plan or if the owner is fundamentally too important to the day to day business. In these cases, if the business success is rooted in the involvement of the owner, then the owner stepping away and selling the business won’t be possible and will be a greater risk to the transition. In some rare exceptions we’ve built-in much longer transition times, allowing us to work together with sellers to find a right replacement.
- We look at a lot of businesses and have the advantage of both seeing and doing lots of transactions. As a result, there have been a number of times where we have had to pass on good opportunities because of an inability to bridge a given gap. Part of our success is because of the amount of opportunities that we look at, ultimately only pursuing a very select number. Additionally, we often use the expression “you name the price, and we’ll name the terms’ and we’ve been able to close valuation gaps with terms on the purchase of the business that are favourable to us in lieu of paying a lower price.
- Our team is deeply experienced in making successful transactions, and we have excellent reference points. As a result of our track record and being in the position for potential sellers to talk with past sellers about their experiences working with us to past sellers, it makes having confidence and trust in us, and the transaction, much easier.
From your extensive experience with SMEs, what factors or considerations do you believe are crucial for ensuring a smooth transition during succession planning?
As I’ve mentioned before, we’re very specialized at Lynx Equity Ltd. so what we are thinking about how to create a smooth transition in succession really comes down to one factor for me – which is the people. At the end of the day, the people who are in the business will have the most influence, as well as will have the most impact from the transition of sale. So, as specialized buyers, we are thinking about how the people will be impacted and how we incorporate them into our process. This comes down to the root of a smooth transition, which is finding the right people for the transition, and picking the right company to support in its transition. We have a whole HR group that is focused on finding those right people and transition opportunities to ensure that is beneficial to all of the people involved.
In the context of SME’s, business can be very personal for them, especially in the context of succession planning. How has this belief influenced your strategies and trends you’ve observed in the market, and how do you see it impacting Lynx Equity Limited’s approach to acquisitions and succession planning in the future?
It’s important to acknowledge that these businesses are truly like family. By this I mean the business itself makes up the existing family’s legacy, and the people that make up the business are the extended family that these sellers are trying to ensure that they can take care of. This level of personal connection and stake to the business as a whole means that we, as a buyer, will always have to go the extra mile in developing strategies that are sensitive, delicate and respectful to sellers and the family that they have created within the business. There isn’t a one size fits all model that will work for this market. Rather, it’s a tailored approach – one that is focused on befriending these businesses, and understanding who they are, and what they want and collaborating with them to identify what’s best for the business and its people. The most important (and humbling) reminder for a buyer is that the seller knows the business better than any one else (even the buyer), and they need to be included in the strategies that are implemented.
Lynx Equity Limited’s engagement in community and charity work, from medical care and research to animal protection, is notable. Can you discuss why this aspect of social responsibility is a priority for your company?
We have a lot of investors with great charities that we are happy to support, and some of those charities include animal protection and medical care. Personally, I’ve always been a huge animal lover, and they don’t have a voice and I think it’s up to humanity to be their voice for their welfare. It’s an honour to be able to have the animals we do have in this world, and if you’re in a position [like we are at Lynx Equity Ltd] to be able to make a change, I truly believe that you should try and do that. This sentiment also translates to the medical care support that we offer as well. Canada has always been far more slow and cautionary in its approach to medical care innovation and research, and if there is a way that we can contribute to enhancing the quality of research and care that Canadians (current and future generations) could get, and subsequently the quality of life for Canadians, then I want our group to be a part of that.
See the original article here.