Planning an exit - strategically
Entrepreneur Ron Tepper seized the opportunity to build a leading transportation company and now is at the fork of a new road as he completes the ownership transition, while preserving a bright future for the company and its employees.
 Entrepreneur Ron Tepper at Consolidated Fastfrate's Inc. head office in Woodbridge, Ontario For entrepreneurs who spend every waking hour building successful businesses, knowing when to leave on a high note can cut to their very core. Yet, great leaders must carefully think through transfer of ownership plans to ensure their legacies endure. For entrepreneur Ron Tepper, this process started five years in advance of selling his business when he worked closely with his financial advisors and an advisory board who offered different perspectives on the overall strategic direction of his company. Tepper joined Consolidated Fastfrate Inc. in 1994 and saw potential in the struggling provider of transportation and logistics services. Since being founded in 1966, the company has grown into the largest less-than-truckload intermodal carrier in Canada, transporting more than two billion pounds of freight annually. Growing a business with financing solutions In late 1994, Tepper purchased the company and soon bought out his partners to become majority owner. Roynat Capital, a member of the Scotiabank Group and Canada's premier long-term patient capital solutions provider, came on board to finance part of Tepper's purchase. Turning his sights to growth, Tepper expanded Fastfrate's more than 40-year partnership with CP Rail to bring international intermodal delivery to the forefront of the industry. Intermodal delivery brings together various modes of transportation for freight such as rail, trucks and ships. Roynat helped Fastfrate finance land and building acquisitions that transformed its facilities into a leading-edge infrastructure throughout Canada with subordinated and term debt, and equity and advisory services. Fastfrate's new facilities were configured to accommodate carriers, such as ocean container lines, to allow more flexibility than just loading boxcars. "We had created a relationship on almost every level within Roynat that was honest and credible," says Tepper. "They believed in me, the company and our business plan. It was extremely valuable because I was able to make decisions quickly by picking up the phone to get what I needed." In 2006, when Tepper wanted to expand and diversify the business, he was prepared to share the risk. He sold a 15 percent stake to Roynat, securing a portion of the value he had created and still having the resources in the company to expand. "I gradually got a sense that there were other things I wanted to do with my time," says Tepper, who is in his late 50s. A leveraged buyout allowed Tepper to monetize his majority ownership stake In 2007, Tepper was ready to take his next step. "I was introduced to a private U.S. equity firm and we explored how we could build a bigger enterprise together," says Tepper. Roynat brought in Scotiabank's Private Equity Sponsor Coverage Group, a specialty lending team that works with North American private equity firms and financial sponsors to structure and arrange senior debt solutions for mid-market leveraged buyouts. Together with GE Capital, the group provided senior debt financing to facilitate the acquisition of a majority stake in Fastfrate by Fenway Partners of New York and Westerkirk Capital of Toronto. This allowed Tepper to monetize a substantial portion of his ownership, while still remaining involved in the business. "I really needed an anchor and sounding board through this process and I found that in Don," he says, referring to Don McLauchlin, Roynat Vice President, Strategic & Client Development. "He had a lot of experience with ownership transitions and it was important he really understood my situation because my decision affected 2,000 employees and their families." At the recommendation of McLauchlin, Tepper had set up an advisory board comprised of industry experts. Bringing in advisory boards can be a difficult decision for many entrepreneurs, but when it came time to sell, it was clear that the documented strategic role of the advisory board actually added to his company's value. Sales had doubled and earnings (EBITDA) had tripled since its inception. As proof of its value, the board remains in place today. Tepper stayed at the helm for a transition period until Peter Marshall was named President and CEO in 2008 and to this day still retains 25 percent ownership. As Executive Chairman, he now focuses on identifying acquisition prospects and maintaining key relationships with customers, employees and unions. In 2008, Fastfrate was named one of Canada's 50 Best Managed Companies for the seventh consecutive year - an honour recognizing Tepper's business vision as well as the company's commitment to its customers, business partners and most importantly its employees. Fastfrate continues to work with Scotiabank. Recent funding for a new cross-dock facility was provided by Roynat and Fastfrate is now transitioning over to a full suite of Scotiabank banking services that include cash management, electronic banking, payment services and VISA* business cards. |  |  After selling a majority stake in Fastfrate Inc., entrepreneur Ron Tepper is enjoying other interests and applying his business management skills to manage his significant investment portfolio. When Ron Tepper joined Consolidated Fastfrate Inc. he saw the opportunity to build on the natural strengths of the business and to take advantage of key advisors from within the industry and his financial partners. Now that he has sold a majority stake in the business and completed the transition from his day-to-day operations role, he is applying the same energy to managing his personal portfolio. Today, Tepper is working in partnership with Scotia McLeod, the investment arm of Scotiabank and a division of Scotia Capital Inc., in building his multi-million dollar portfolio. The key is specific wealth management goals and a plan to achieve them "The only way to realize 'better than average' returns is to have a solid relationship and proven track record with a bank to get access to needed funds fast," says Tepper. "We are running my portfolios like a business versus a brokerage operation, with spreadsheets for every transaction and matrixes on performance of the companies we hold. This provides us a way to make reasonable decisions based on fact and knowledge." He has access to a team of highly- qualified experts within the Bank who collaborate to provide advice and solutions based on his goals. For example, an investment strategy originated by Scotia McLeod and Scotiabank's Private Banking Group is funded by a loan secured against his portfolio. ScotiaMcLeod also provides customized accounting that includes unique reporting to allow Tepper access to specific information. To lock in within the lending arrangement and secure long-term interest borrowing rates, a tailored agreement was specifically designed to meet Tepper's needs and provide additional security. Effective estate and tax planning are also part of the mix. "Ron's goals are specific and a plan is established, so we are able to measure for valuation purposes," says Brent Moody, Wealth Advisor Director at ScotiaMcLeod. "This helps us put systems and actions in place to ensure goals are met." Giving a chance to young entrepreneurs Having sold a significant interest in Fastfrate, Ron has the time and resources to focus on another of his visions; setting up an 'angel fund' to invest in good businesses that may be undercapitalized and/or owned by young entrepreneurs who simply need a chance. He is currently setting up a team of advisors and stakeholders to sit on an advisory board, including CEOs of some of Canada's largest companies. Four board members have agreed to serve with more to come. Tepper plans to hire a President for the fund who will bring proposals to the board for investment consideration. Once given a green light, members can also advance the cause through their business relationships, networks and opportunities. Already having invested in one such deal and working on another, he acknowledges the returns may or may not be great but he is not doing it for the money. "The same chance I was given, I want to pay back," he states simply, adding that significant jobs creation will be one of the results.  | ||
| Charting a new course Today, Tepper has time to enjoy other pursuits, like spending time with his wife Audrey and their four grandchildren at the family's condo in Ft. Lauderdale. He is also now focused on a new passion and is using some of the wealth he created in building Fastfrate to establish an 'angel fund'. This will allow him and a select few to invest in good businesses that may be undercapitalized and/or owned by young entrepreneurs who simply need a chance. | ||||
 Tepper navigated Fastfrate's evolution taking full advantage of what the Scotiabank Group has to offer every step of the way. His exit plan included a role that allows him to continue to shape Fastfrate's future, yet take time to pursue his personal passions. Although humble, he does offer the following words of wisdom to others contemplating selling all or part of their business: "You really need to make sure you have something to do when the deal is done, that your life remains meaningful," he concludes. "I am finding out new things about myself as this process unveils. I have a list of things I want to do and I hope to achieve all of them. * VISA Inc./Lic. user The Bank of Nova Scotia. | ||||
