Acquisitions

Support for acquisitions of new or existing businesses is only available when the business (or business activity) is eligible under Aboriginal Business Canada Program Priorities and policies and guidelines.

Aboriginal Business Canada's mandate is to increase or maintain the number of Aboriginal-owned and -controlled businesses. The following table summarizes various acquisition scenarios and their eligibility for support.

Acquisition Scenario	Eligibility
Aboriginal entrepreneur plans to purchase majority share (at least 51 percent) of an existing non-Aboriginal-owned business.	Eligible for support.
Aboriginal entrepreneur plans to purchase an existing Aboriginal business.	Eligible for support.
Aboriginal minority partner (less than 50 percent ownership) plans to acquire majority ownership (more than 50 percent) from non-Aboriginal partner.	Eligible for support.
Aboriginal minority partner (less than 50 percent ownership) plans to acquire majority ownership (more than 50 percent but less than 100 percent) from Aboriginal partner.	Not eligible for support, since this activity does not result in the creation or maintenance of an Aboriginal- owned and -controlled business.
Aboriginal majority partner (more than 50 percent) plans to obtain greater share (but less than 100 percent) of business.	Not eligible for support, since this activity does not result in the creation or maintenance of an Aboriginal-owned and -controlled business.
Aboriginal partner (majority or minority partner) plans to obtain 100 percent ownership of business from an Aboriginal or non-Aboriginal partner.	Eligible for support.

Business acquisitions are normally arm's-length transactions and must demonstrate fair market value. Exceptions for non-arm's-length transactions may be made for clients in remote communities. Remote communities are normally defined as communities that are more than 350 km from the nearest community of more than 25 000 people, however additional factors (eg road access), at the discretion of ABCs regional manager, may be taken into consideration.

Goodwill may be considered as an eligible cost of the business acquisition, when it is supported by the business valuation.

Aboriginal Business Canada will only consider supporting business acquisitions when the agreed upon purchase price is within the range specified in the business valuation.

Applicants must provide two to three years of financial statements for business acquisitions.

Since acquisitions are generally less risky than business establishments, Aboriginal Business Canada generally offers less assistance for these types of projects (e.g. 30 percent).

The appraised value of any personal living space associated with an acquisition is subtracted from the overall value and is not eligible for funding.

The following special conditions apply to proposed business acquisitions that involve operations or projects previously supported by Aboriginal Business Canada.

• When a previously supported operation or project related to a business being acquired is within the control period, the seller must complete an Assignment and Assumption Agreement to transfer the Letter of Offer to the purchaser. Aboriginal Business Canada will not provide additional support to the purchaser since the original contribution agreement remains in force. However, additional support for new endeavours, such as business support and trade and market expansion, may be provided.
• When the business is to be acquired after the control period for the previously supported operation or project ends, and the support was in the form of a non-repayable contribution, Aboriginal Business Canada deducts the amount of support from the total appraised value of the business. This condition is generally waived after a reasonable time following the control period, normally five years.

As a pre-disbursement condition in the Letter of Offer, legal title of the business to be acquired must be transferred at the time of purchase, and the applicant must provide Aboriginal Business Canada with an acceptable legal purchase agreement. This agreement must include information about prior liabilities, obligations and anti-competition clauses.

The following table describes the type of business valuation required depending on the size and type of transaction.

Type of Transaction	Size of Total Purchase Price	Type of Evaluation Required*
		Desk Valuation by Develop-ment Officer	Estimate of Value by CBV**	Opinion of Value by CBV**	Appraisal of Assets by an appraiser (CA, CMA, CGA or CBV)
Purchase of "Going Concern" (could be an asset or share transaction)	Less than $75 000
	$75 000- $250 000
	More than $250 000
	All non-arm's-length transactions
Purchase of Assets (for another use)	Less than $75 000
	More than $75 000
	All non-arm's-length transactions

* Requirement may be increased at the Regional Manager's discretion, depending on the risk of the project and the development officer's experience.

** At the discretion of the Aboriginal Business Canada Regional Manager, a qualified professional (i.e. Chartered Accountant [CA], Certified Management Accountant [CMA], Certified General Accountant [CGA]) may be used instead of a Certified Business Valuator [CBV] when it is determined that a Certified Business Valuator is not available or necessary for a specific project.

The Chartered Institute of Certified Business Valuators Web site provides a list of members sorted by province for easy reference.