Sim is the 28-year-old director of operations at Vitruvian Acquisitions Ltd., a private-equity firm that specializes in acquiring the businesses of retiring baby boomers looking to cash out – a growth sector if there ever was one. The deal followed more than six months of negotiations and was full of “excitement, immense pride and a sense of accomplishment,” Sim says.
Photo by Shaun Robinson
It might have been an even bigger moment for Larry Toderan, the co-owner and co-founder of Air Chek Industries Inc., a company that sells heating, ventilating and air conditioning (HVAC) technology. After all, signing on the dotted line with Vitruvian meant transferring ownership of his life’s work, the company he had founded 25 years earlier. But while trusting someone half your age with the business you’ve built from scratch might scare some people, Toderan describes the decision to sell his company to Vitruvian in December 2009 as a satisfying one. “I’m coming up to 69 years of age,” Toderan says. “If I was younger, it would have been a little more difficult.”
Sim graduated from the University of Calgary with a mechanical engineering degree in 2005 and quickly found work with Petro-Canada. As he and friends – and eventual partners – Chris Popoff and Adam Zemeadim left their broke student days behind, they realized that they wanted to do something constructive with their money. The trio began meeting every Saturday at Sim’s house to discuss investment opportunities, which initially focused on the real estate industry. But it was a conversation with his then-girlfriend’s father, Roger Watson, over the pros and cons of fixed and variable-rate mortgages that started him on the path he’s travelling today. “He looked at me and said, ‘What do you want your net worth to be when you are 50?’” Sim remembers. A second conversation with Watson about return on invested capital turned Sim’s attention away from real estate and towards buying businesses, and he soon found himself following in the footsteps of his now ex-girlfriend’s father.
Sim, Popoff and Zemeadim launched Vitruvian Acquisitions in 2007, naming it after Leonardo da Vinci’s renowned Vitruvian Man drawing. While working full-time jobs, they began to build their network of business owners in search of the appropriate opportunity. “There is no directory for businesses that are for sale,” says Sim, who reached out to friends, families and strangers, hoping to find someone with a company to sell. Sim and Zemeadim began meeting during their lunch breaks to flip through the phone book and cold-call companies. Eventually, their persistence paid off.
In May of 2008, Vitruvian acquired its first company, a 44-year-old HVAC manufacturing company named Western Ventilation Products Ltd., more commonly referred to as Westvent. They found Westvent through their growing network of business owners, and Sim quit his engineering job five minutes after getting confirmation of bank financing for the deal. In December of 2009, Vitruvian acquired Air Chek, which was one of Westvent’s customers. The companies have combined annual revenues of $15 million and collectively employ 28 people. The businesses also happen to be located 30 seconds apart in a northeast Calgary industrial park.
Holding and operating the companies it purchases sets Vitruvian apart, Sim says. “Our thing is buy and hold. We’ll buy a company and we’ll hold it forever, basically.” And while some acquisition companies raise large amounts of capital and buy three or four businesses at once, Vitruvian tries to avoid overcommitting. “We try to do it relatively slowly so we gain a good understanding of how the businesses operate and what goes into running them, just so we’re not biting off more than we can chew.”
That’s a bold statement coming from a 28-year-old who runs two large companies without any formal business education. But Sim is quick to point out that his approach, learning as he goes, is working pretty well so far. “In my opinion, you don’t need to have a business degree to understand business,” says Sim. “If you’re good with people and you have a natural inclination to understand how things work, then I think you can be successful.” Sim says his age, drive and enthusiasm appeal to owners who are looking to sell. “When you’re in your mid-60s and early 70s, you have no energy for the business anymore,” Sim says. “A lot of times these small companies don’t have succession plans in place. Family doesn’t want to take them over and there’s a massive amount of knowledge and transferred wealth that gets lost if these companies aren’t able to sell their businesses. That’s where we fit in.”
Fitting in hasn’t always come easy, often because of his age. Age proved to be an obstacle when he was trying to secure bank financing and Sim was worried that it would crop up again when he transitioned into the role of general manager at Westvent. He replaced a general manager who, at 74, was almost three times his age. That put him in charge of employees who had children older than he was. “I don’t think I’ve been as nervous as that outside of my wedding day,” Sim says. In the end, though, it proved to be a non-issue.
Perhaps the biggest challenge of all, Sim says, has been respecting where the companies have come from while still trying to move them forward. “When you go into a business, there is a pre-set corporate culture. Trying to change that corporate culture is very difficult.” What makes those changes even more difficult is the fact that they’re often a function of age. “The baby boomer generation tends to employ a top-down management style, while the opposite is true for people my age,” Sim says. “Neither [generation] is right or wrong; they’re just different.”
Generational differences aside, Sim believes the baby boomers who sell their businesses to him and his partners are investing a great deal of trust in them. “They want to know that it’s going to be taken over by guys who care about the company, who care about the lives of the employees and who have the energy to continue what they’ve built,” Sim says. For Toderan, the former co-owner of Air Chek, selling his business was part of a 10-year succession plan that included hiring a general manager that would carry the company through an eventual ownership transition. “We were looking to sell the company; if the individual that purchased it had the necessary capital, we were selling,” he remembers. “We’d certainly like to pass it on through to somebody who had the ability to carry it on and make it more successful.” So far, Sim and his partners seem to be doing all the right things, and Toderan is pleased with their work. “[Sim] is quite a bright young man. He’s quite ambitious.”
The weekend meetings that started when Sim and his partners were new graduates continue today. “We’re guilty of having massive goals,” says Sim, who is Alberta’s youngest member of the Young Presidents’ Organization. “I don’t know if it’s our age and our optimism, or that we haven’t been jaded yet.” But whatever it is, it appears to be working. Vitruvian is actively seeking another company to acquire, and Sim is pleased with what the company has accomplished in its first four years. “They see in us who they were 25, 30, 40 years ago,” Sim says of their baby boomer partners. “And I think that’s what they’re drawn to.”
Next Up is a series of profiles of emerging leaders in Alberta’s business community and public life.