Entrepreneur Capital seeks hidden gems in Québec’s lower mid-market

Entrepreneur Capital has carved out a niche in Québec’s active private equity market, targeting small-cap opportunities often missed by other investors.

Last month, Entrepreneur closed its fifth platform deal, acquiring a controlling stake in Spencer Supports Canada, a Montréal- and Stanstead, Québec-based apparel business, partnering with President Markus Haug. Terms weren’t disclosed.

Spencer consists of two brands – HB Heller, a 34-year old maker and distributor of intimate apparel and swimwear for women, and GSL Creations, a supplier of fashion clothing for women and teens bought by HB Heller in 2013.

Partner André La Forge told PE Hub Canada the company’s unique competitive position in a fast-changing sector makes it a fit in Entrepreneur’s strategy.

“In an industry that’s shrinking, Spencer has an edge as a high-volume, private-label garment business,” La Forge said. “Its ability to take leading designs, make them affordable and get them out quickly has firmly entrenched the company with its client base.”

Spencer also has cachet as a specialist in plus-size apparel, an under-served category, La Forge said.

Entrepreneur plans to leverage Spencer’s “unexploited potential,” La Forge said, by looking into “new avenues of development,” such as acquisitions. It will also explore replicating Spencer’s model in the United  States.

André La Forge and Eric Doyon, partners of Entrepreneur Capital.

Entrepreneur was founded in 2013 by Partners Guy Bessette and Eric Doyon, both seasoned operators.

Bessette’s career includes a nine-year tenure as head of body shop network Fix Auto. Acquiring it with a partner in a management buyout in 2002, Bessette oversaw Fix Auto’s 330 percent sales growth in Canada and global expansion.

Doyon started out in the PE group of Caisse de dépôt et placement du Québec. He later took on senior executive roles in a number of privately held companies, among them frozen fruits and vegetables supplier Europe’s Best.

The pair set up Entrepreneur to acquire businesses with Ebitda of $3 million to $8 million in a range of sectors, including consumer, distribution, light manufacturing and services. It focuses on companies in Québec and eastern Ontario, partnering with existing owners or teams leading MBOs or buy-ins.

A key principle of Entrepreneur’s strategy is sourcing deal flow in corners of the market where large-cap and mid-cap investors tend not to go.

“We saw an opportunity in the lower mid-market, in niche businesses with very interesting stories but that frequently get overlooked,” Doyon said.

La Forge joined Bessette and Doyon in 2016. He was previously a top executive at security services provider Garda World. Before that, he spent 13 years as a senior investment pro with Borealis Private Equity, Kilmer Capital Partners and Roynat Equity Partners.

Entrepreneur capitalizes deals primarily by tapping into a network of wealthy investors. The firm’s principals always have “skin in the game,” Doyon said, putting up at least 10 percent of the money.

Entrepreneur invests without a fixed timetable for realizing assets. It has so far exited two investments, generating a net multiple of more than 3.5x invested capital for each, according to the firm.

Earlier in 2019, Entrepreneur sold a majority stake in Voyages Traditours, a Laval, Québec-based tour operator of cultural circuits, to Clearspring Capital Partners.

Entrepreneur had backed Voyages five years earlier and helped double its size through several growth initiatives, including the company’s first add-on deal, Doyon said. The firm retained a stake with Clearspring’s acquisition.

Entrepreneur’s second exit came from Inter V Medical, a Montréal-based medical devices distributor. It acquired the company in 2013 and sold it within a year to CHS, backed by Cortec Group.