Buy the Target With the Target's Own Assets

“Taking inspiration from the coup they had pulled off in the company’s infancy—the purchase of their first 11 Couche-Tard stores in Quebec City—the four leaders managed to finance the transaction by leveraging the real estate assets owned by their target for purchase. They found an American buyer for all the buildings owned by Johnson Oil, and Couche-Tard would become their renters. The money they raised from this sale of assets was sufficient for an American bank to agree to extend them a loan that would cover the balance of the purchase cost without requiring additional collateral.”

“Inflation, bankruptcy, the closing of factories, unemployment and poverty were painful realities across Canada, and the banks were becoming increasingly cautious. How could the economy be revived when entrepreneurs couldn’t borrow money to carry out their projects? To solve the problem, the Canadian government adopted a program to guarantee loans for small businesses, up to a maximum of $250,000. In effect, the government would act as guarantor in case of default. The project provided concrete support for small businesses as well as a colossal gift for the big Canadian banks. Fortin discovered that the program offered a solution to the financing dilemma faced by the four shareholders. No problem, he told Bouchard: We’ll split the company into separate units and apply for small business loans. The loans would be guaranteed by the government, so the banks would have no cause to refuse them. Following the advice of the Banque Canadienne Nationale, the group chose a different institution to finance its growth: the Bank of Montreal.”