Braham Moondi:
Hello, everyone. Welcome to BDO's PE Market Pulse a series of insightful conversations with leaders across the private equity landscape, sharing perspectives on current market trends. I'm your host, Braham Moondi, national leader of BDO Canada's PE practice and insurance, and I have the immense pleasure of having Dale Tingley join us today. Dale is a co-managing partner at Canadian Business Growth Fund, or CBGF. CBGF is one of Canada's leading growth capital investors that provides patient minority capital and strategic support to Canadian mid-market businesses across a variety of industries. At CBGF, Dale is responsible for the overall strategic direction and management of the fund. Dale also actively leads and oversees the investment team's activities in origination execution and portfolio management. So welcome, Dale. Thank you so much for joining us today.
Dale Tingley:
Yeah, thank you so much for having me. It's a pleasure.
Braham Moondi:
Of course, and I'm very excited to have you here because you bring a very unique vantage point into the state of Canadian entrepreneurial businesses from coast to coast. So, we're going to dive right into the question. Starting off with PE firms and portfolios have faced numerous challenges in recent years. We've heard economic and geopolitical uncertainty, inflation, volatile interest rates, not to mention productivity, and other salient issues driven by COVID. In our recently published 2025 PE in Canada report, when asked about top headwinds, both fund managers and PortCo CFOs put geopolitical tensions, which is very timely and availability of talent at the top. From your perspective, what are you seeing in terms of headwinds faced by funds as well as portfolio companies?
Dale Tingley:
Yeah, thanks for that. We agree, those are the two primary items that we're seeing day to day, like working with entrepreneurs, starting with geo geopolitical headwinds. I think the theme the past few years, even before Trump came back into the presidency, has been uncertainty. All the items that you mentioned, but particularly rising interest rates has made building businesses and investing more difficult. Certain growth strategies that were fueled by debt just became less effective and more expensive, led to financial slowdown. And I mean, there's been a lot of talk about a slow market for exits and a lot of that can be at the feet of rising interest rates. And I think taking a little bit of a step back, a lot has been made about the tariff noise and, you know, and some of the things that the U.S is trying to accomplish right now. But there's a lot going on in the world. Don't wanna forget it, meaning it's not important, but leaving kind of like the conflicts of the world aside, there's big structural changes happening in the world. Like the developed economies of the world are undergoing massive demographic shifts. There's very high levels of debt globally with nations. And there's been a shift from globalization to de-globalization and development of strategic trading partnerships, and the rollout of A.I. These are massive like, you know, once in a century type things, and they're all kinda hitting us within the same decade. So it's a lot to deal with. Like it's exciting, but it's a little bit scary at the same time.
Braham Moondi:
No, I completely agree. And thinking of tariffs, thinking of this deglobalization, one thing that comes to mind is our supply chains and the disruption cost there, which actually more than a third of our PortCo CFOs in our survey identified supply chain interruption as a top challenge. Now tariffs have been on, they've been off. But how is CBGF partnering up with businesses across Canada to alleviate some of these concerns?
Dale Tingley:
Yeah, that's a good question. I think our view on it, so obviously we are spending a lot of time talking about this and working with companies mostly to help them start to think through the process. 'Cause changing a supply chain, whether it's on who are you going to sell to and also who you're going to get your supplies from, that can be a longer term proposition. And so, I mean, you mentioned about post-COVID, there was a lot of disruption in COVID. I personally haven't seen a lot of meaningful supply chain changes after that. We kind of withstood the storm. And then we kind of, as we can do, like, we kind of fell back into the old playbook of what worked and what is there. I think the noise around tariffs and the threat of tariffs has kind of made people remember that this is a real risk and that we need to actually diversify on the sale side and also the supply side to make sure supply chains are a little bit more diversified and robust. Because like, just as an example, I saw a presentation recently and they shared that Southeast Asia is going to be the world's largest market in the next 10 to 20 years from a consumer standpoint. And so a big question that most of our companies are not prepared for is how are you setting yourself up to sell to those people? And then if you're selling to consumers and companies in that region of the world, what does your supply chain need to look like to support that? And what is the unit economics of being able to play there? And so I think the immediate, I guess, focus needs to be on, and this is what we're having discussions with our companies about is where's the puck going? Like, what do we need to do to get there and position ourselves well because for a very long time and for good reason, a lot of Canadian companies acting very rationally have been able to rely on a cheap Canadian dollar selling to our neighbors down south. And it's been a wonderful strategy for a long time. And like it or not, that strategy's not gonna be as effective as it used to be. So we have to figure out what we're gonna change.
Braham Moondi:
The famous ethics arbitrage, that that is no longer the go-to playbook. It's interesting because, what you mentioned about Southeast Asia and that being a huge, somewhat untapped market, how are we preparing ourselves for it? And more importantly, how are we viewing global competition? So from a fund or from an investor perspective, over the last decade or so, we've seen a lot of US funds coming into Canada. Of course there's other global funds coming in as well, but I think both sides of the border, Canada uses it as a, like springboard for expansion of their market as well. How are you seeing, as a Canadian fund, investing in domestic businesses, how are you finding the current competitive landscape for deals? Is there any changes in seller preferences, motivations when they're selecting a Canadian or a foreign GP?
Dale Tingley:
Yeah, it's a good question. Like, good companies will always find a lot of people interested in them regardless of which country they're from. And so we've seen, like we've been around since 2018, and so I would say the activity levels of U. S funds for Canadian later stage venture and growth stage companies has been strong. And we see that stable, in some sectors accelerating, which is actually a really good testament to the talent and strength of Canadian entrepreneurs. We're building interesting things that people globally wanna invest in. So that's wonderful. I think the practical challenge that Canadian companies face when talking with U.S investors, and these are structural things, they're not about the individual people at these funds, is that a lot of the growth funds in the U.S are large. And so for their funds to work, they have to deploy $25, $35 or even $50 million minimum USD for it to make sense for them to invest. And yes, there are some Canadian companies that that makes sense for. There's a lot that it doesn't. And where we've actually been able to find a pretty interesting niche is there may be companies that have long-term potential to raise $50, $75, $150 million, but they're not ready for $25 U.S now. And so where we've been able to work with a lot of companies is be that, it doesn't have to be the first, an earlier investor. And maybe the right answer for your company today is $7.5 to $15 million of growth capital. And what can we do in the one, two, three years with that investment to hit certain operating and financial milestones so the company could be one that's ready to use $25-plus million dollars to deploy it effectively and such that you don't have to sell too much of the company to bring in that kind of investment. And so that's worked out very well in a couple of situations we've been involved with, and I think it's really resonating with people. It's like, it doesn't necessarily mean Canada good, non-Canada bad, it just means it's the right fit for the company at the right time of their development. And that's where we found that there is a gap in the Canadian market. There's a real gap for companies that have that potential to go really far, but they don't need $50 million today.
Braham Moondi:
Yeah, no, that's well said, Dale, especially that gap between venture and then what I would say kind of late mid-market stage private equity, that gap definitely exists in Canada. So talking about growth capital and opportunities, and we've talked about headwinds here, so we'll take a little bit of a pivot. You know, challenging environment is also ripe for opportunities. So what are you thinking in terms of the area, the focus where companies can invest so they can continue to grow, especially when we're thinking about businesses, the type of businesses that you're investing in. Thinking of the things that you mentioned, AI, expansion into different markets and thinking through that. What are some of the areas of focus?
Dale Tingley:
Yeah, so it's a philosophical question that we've been thinking about quite a bit, because given like my view, right or wrong, is that the ultimate endpoint of all the tariff discussion will probably be an updated free trade agreement. And that a lot of the worst case scenarios are not going to be what we thought they were. And so, but having said that, we're trying to be really rational about where we pick our spots. And so we made three investments so far this year, and so two of the three are Canadian focused, like they're for Canadians, like all their operations and sales are in Canada. And then the third, most of their work is in Canada, but it's a service company and they're gonna acquire U.S businesses. And so those sectors, these are sectors that we've always liked and we really liked them as they're related to healthcare and waste management. And another is like professional services, it's a law firm, it's a consolidation of law firms. And so what we like about those areas are they're big markets. They're necessary services. They may not classified as essential services, but they're necessary. And you know, especially when there are more people-driven businesses, there's a bit more flexibility in case stuff happens to them, right? Like there's always flexibility to make adds or maybe trim the team if required if, I guess, headwinds hit them.
Braham Moondi:
Yeah.
Dale Tingley:
But again, we try really hard to, it's difficult, but we try not to look at next year, and the next quarter and in the next year. We try to take a longer term horizon. The challenge is, especially if you're back in a company that may not be cashflow positive, is you're going to either need to put more money in or get help from someone else to kind of fund through the short term into the long term. And you do take some risk along the way. And again, we're growth investors, we're paid to take risk and find out which are the right risks to take. But I think what we've learned over the last, since 20, yeah, in 2022 to now is that you can't rely on the next check coming in. And so you really need to make sure you're backing companies with great fundamentals that could go to cashflow positive if they needed to, or that they're gonna perform well enough that other people might join in if the existing investors choose not to put more money in. We follow on a lot, but again, we can only do $20 million in any one name. So there is a limit to what we can do on our own. And so we're really, really mindful always, but especially in the last couple of years, is making sure that there's a clear path to, if they're not already profitable, a clear path to profitability.
Braham Moondi:
You need that stamina, that stamina to withstand a little bit of that disruption or the volatility in the market. So you mentioned a couple attributes. You're looking for, your check size is $5 to $20 million, looking for revenues, probably $5 to $100 You mentioned a potential cashflow positive. Any other attributes you're looking for when investing outside of these kind of metrics?
Dale Tingley:
Yeah, like on the softer side, this might be a list of what every investor looks for and it's really hard to get it all right, but we're looking for very strong leadership teams. It doesn't mean they have to be fully formed, but there has to be some great teams in place now. I think building on that, maybe this is part of what makes them great, is we're really looking for teams that have a growth mindset and a willingness to partner. Because part of our strategy is to lean in and help companies put the foundations in place to build a great company that can be 3, 5, 10 times as large as it is today. And if you already know all the answers, like, you don't really need a partner like that, facetiously. But like if you're not really looking for a partner, like, we bring money and we want to bring partnership, not just from us but like the talent network that we've built over time, those things go together in our minds. So if you're looking more for capital than for partnership, that's not really a great CBGF fit. So those two things. The third would be a compelling strategy, like really understanding what makes you different. Better is a hard thing 'cause someone else can always be better, but what makes you different? We think that's a little bit more durable. And just given that, as we talked about earlier, uncertainty and chaos seems to be the new normal. So adaptability and flexibility is really important. It's very hard to test for.
Braham Moondi:
Yeah.
Dale Tingley:
Maybe the last five years is people can have a lot of a case study to show, like, how they've dealt with all the challenges that have been thrown towards it, but that will be key. It's always been key, but especially now given that we think the next 10 years will be full of uncertainty, people that can figure that out.
Braham Moondi:
Yeah, the only thing certain is uncertainty at this point, so being able to navigate that. And no, and that's awesome Dale, thank you for sharing that. And if you could just expand a little bit on your focus on that minority investment. You mentioned strong leader. But just talking through how you share, how you partner up with Canadian businesses and mentorship that you also provide.
Dale Tingley:
Yeah, maybe I can give a bit of a case study on just one name that kind of touches on how we try to work with companies. I wouldn't say how we try it, a case study in how we do work with companies. And so I'd like to use Lift Auto Group. So that was our very first investment. It's based out of Kelowna, BC. And their business is to consolidate the automotive collision repair industry. And so we invested in Lift when they had five shops all in Interior British Columbia. And so what they brought was longstanding knowledge of the industry, knowledge of M&A and how to operate these things at scale. Some, they had experience and they had a really good playbook on how they were going to do it. And so, again, going back to what we talk about in terms of helping with the foundations is we were the first institutional investor. We worked with them to put together a proper board, effective data capture and reporting. So not just us, not reporting to the board, but it's reporting that the management team should be looking at, what data is the management team gonna be looking at every day to help you make better decisions. And so they were inclined to do this anyway, and so with a little bit of help and guidance, they were able to get to a great spot. We helped them create a more robust M&A process. They had a good one, but again, this is what we do all the time. And so we helped them with that, like in terms of streamlining diligence and legal documentation. And then we were able to help them bring on more financing partners, some equity partners and debt financing partners. And then there's a lot in addition to that. One other thing I'd say that we did is there's a U.S company that, they're very large, same kind of idea, consolidation in the sector. We'd recruited a chair of the board who was associated with that company. And so he was able to bring in the former CEO and the former COO to advise the Lift management team on how to go from 50 shops, which is what they were a year ago, and what's the next layer that you have to do to support your growth to 250 or a much larger number. And that was a different thing. Like we helped them get from five to 50, and what did they need to do? And so that was wonderful. And so they continue to help out the company. But these are the kind of things that, our model is to lean in on some foundational things early and set the stage for certain level of growth and then bring in experts to advise the company on that next level of growth that frankly I don't have that experience and people that in the lower mid market don't have, but we can find the people that do.
Braham Moondi:
And but you have the network, right? And which is so important. And before we go, a couple questions. You've been with the fund since its inception, and we talked about you just talked about this case study of Lift going from five to 50. Having that longer hold horizon gives you, I would say, kind of a luxury to be able to see that growth. So how has that differentiated your strategy and your outlook for businesses that you invest in?
Dale Tingley:
Yeah, it's a good question. The structure of our fund is an evergreen fund, so it does allow for us to be in investments for 10 or 12 years, which is fantastic. And what we've learned from our partners is that they like the option of that length. We've had some early exits, but all driven by the entrepreneurs thinking this is the right time. But the option of having a long-term partner that a fund structure won't dictate the exit horizon of the whole team is really important. Psychologically it's very important. And then let's use the example of Lift. It's doing very well, for all shareholders. A couple more years of compounding, like say from seven, if, say, we had a structure that we had to sell at year seven, you may have a really good return. But if you could keep that IRR going for another three or four years, that could result in another like, one or two times your money.
Braham Moondi:
Yeah.
Dale Tingley:
So it's good for everybody in that respect. And the entrepreneurs, if they're having a good time and they want to keep going, the institutional investors aren't the ones deciding the exit. And again, these kind of things are, when entrepreneurs pick their partners, they just have to think about what their priorities are and what they want. Sometimes they want flexibility and a long time horizon. Other times they want different things. When people ask us what should be looking for an investor, we always advise them as like, you need to figure out what's important to you. And then try to find investors that match that. 'Cause like in anything in life, a mismatch of either personalities or structures or approaches doesn't work. And good companies will always be able to find an investor. They just have to find the right one, and that's the hard thing.
Braham Moondi:
Exactly, exactly. You know, well said. Because it's a relationship, right? Like you're getting in together into the business and you really wanna make sure that you have the right partner with you.
Dale Tingley:
Yeah.
Braham Moondi:
Okay. So thank you so much for that, Dale. I'm gonna move to some quick lightning round questions, just end off with a little bit of a fun spin here. So very quickly, first thing that comes to your mind when I ask best source to stay up to date on market dynamics or market intelligence.
Dale Tingley:
I like to talk to real estate agents.
Braham Moondi:
Really?
Dale Tingley:
Yeah, they have a good sense of what's going on and how people on the street are like making big decisions.
Braham Moondi:
Yeah, commercial, residential?
Dale Tingley:
Both.
Braham Moondi:
Yeah. It is interesting talking to them as well. But yeah, good. If you had to invest in a company this month, what industry, sub-industry would you choose and why?
Dale Tingley:
Well, we're investing in one tomorrow, so I should say waste management.
Braham Moondi:
(chuckles) Okay, perfect. Perfect. Resilient business. First thing that comes to mind when you think of A.I.
Dale Tingley:
Opportunity. I'm gonna say two. So opportunity and scary.
Braham Moondi:
Yeah, yeah, fair.
Dale Tingley:
Yeah.
Braham Moondi:
And any recent or current book that you're reading that you would like to share?
Dale Tingley:
Yeah, I just finished reading this one. I thought it was really good. It's called "No BS Strategy." It simplifies an overly complicated topic of strategic management and planning.
Braham Moondi:
Well, something to add to my list as well. Well thank you so much, Dale, for joining us today on this episode of "BDO PE Market Pulse." And thank you to all our listeners for tuning in. To stay updated on future episodes, be sure to subscribe using the link in the description. You'll also find a link to our 2025 Private Equity in Canada Report in the description and comments. We encourage you to join the conversation by sharing your thoughts and questions in the comments below. If you'd like to discuss any specific findings from the report or have questions about today's discussion, please don't hesitate to reach out. All right, thank you Dale.
Dale Tingley:
Great. Thanks, Braham. It's a pleasure, thanks.
Braham Moondi:
Perfect.