BDC Capital beefs up growth equity team as investing hits $75 mln

BDC Capital has added to the bench strength of its growth equity group to make further inroads in Canada’s lower-mid market and deploy a $250 million fund.

BDC recently hired three investment pros for offices in Vancouver, Toronto and Montréal. Two appointments were at the senior level.

They include Jean Bédard, who will serve as a director. Bédard was formerly CEO of Recentis Advanced Materials, a coating-materials tech startup acquired in 2017.

But he is perhaps best known as a seasoned tech investor. Bédard was a managing director at BDR Capital, a venture capital firm he founded a decade ago. Before then, he led IT and telecom investing at Fonds de Solidarité FTQ and Desjardins Capital.

BDC also recruited Loren Rafeson as a director. Rafeson has spent more than 12 years in principal investing, including senior roles at private equity firm Spectrum Capital Partners and late-stage tech firm Vertu Capital.

The third hire was Franco Perugini as an associate. Perugini joins from Canada Pension Plan Investment Board, where he was an analyst and associate in the direct PE team.

Jean Bédard, director, growth equity, BDC Capital

Claude Miron, vice president and head of growth equity, said the recruits bring fresh capabilities to the team. They also extend its reach, helping introduce BDC’s minority-capital offering to small businesses.

Launched last year, BDC’s growth equity strategy aims to fill a gap for small companies seeking a solid financial foundation on which to pursue growth.

This includes everything from scaling operations and making acquisitions to managing ownership transitions, such as a succession event.

In the past, owner-operators of such companies have often bootstrapped growth or sold to a strategic buyer or control investor for “lack of an alternative,” Miron said.

BDC’s solution is to be a minority investor, deploying $3 million to $25 million to entrepreneur-led companies with revenue of at least $5 million to $10 million. It is also a long-term investor, tailoring its horizon to demand.

Rapid investment pace

BDC capitalized the five-year strategy with $250 million. The fund is so far running ahead of schedule, investing $75 million.

It has backed 10 companies, among them Toronto pharmacy chain Rx Drug Mart.

RxDM secured a reinvestment this year, increasing total financing to more than $15 million. The money is being used for a consolidation scheme that in 2017 involved acquiring 27 Rexall pharmacies.

Other recent investments include Altitude Sports, a Montréal urban and outdoor clothing retailer, and Delco Automation, a Saskatoon process automation and control systems developer.

While BDC’s growth equity group has the capacity to go it alone on investments, Miron says it also partners with other PE firms.

Examples include the RxDM deal, in which BDC co-invested with Persistence Capital Partners and a family office.

A 2017 financing of Montréal last-mile courier Intelcom Express also opened the door to follow-on investor Caisse de dépôt et placement du Québec.

And last year BDC backed Highland West Capital’s acquisition of BID, a Prince George, British Columbia supplier to the forest-products industry. Other investors included EDC and Roynat Equity Partners.

The growth equity group has so far vetted more than 300 opportunities. This and the pace of investing are evidence of a “strong response” to the minority offering and strategic support on tap, Miron said.

However, the strategy remains “at the beginning” and sometimes meets with challenges, he added.

They include a lack of readiness on the part of some entrepreneurs to execute on ownership transitions, Miron said. Additionally, some are not prepared for new governance structures, such as boards and advisory bodies.

Miron’s team will help portfolio companies address these and other issues, in part by utilizing BDC in-house resources. It is already drawing on BDC networks to source deal flow across a range of sectors and regions.

The new team members bring growth equity personnel to nine.

Miron remains in hiring mode and will shortly add another director to join Bédard and Rafeson, as well as Jeremy Billan, Zulf Karim and Maxime Tourangeau.

In the future, the group will likely open new offices, possibly in Calgary, Ottawa and Québec City.

Miron took charge of BDC’s growth equity strategy in 2017 after a 27-year career in corporate finance, PE and VC markets.

His prior roles include managing director at BMO Capital Corp, partner at Edgestone Capital Partners, and vice president, life sciences, at the Caisse.