In the opinion of their CEO, the Montreal companies MTY and GDI made the jump to the stock market prematurely. These confessions are among the confidences recounted in a book launched this spring by portfolio manager Carl Simard, co-founder of the asset management firm Medici.
In the furrows of Quebec flagships is a book telling the story of five Quebec companies deemed exemplary, according to the analysis grid used by the manager to identify rare gems.
Three of the five companies presented are listed on the stock exchange, that is to say the catering franchiser MTY, the building services specialist GDI and the furniture hardware distributor Richelieu.
The other two are ISAAC Instruments, a software provider for freight truck fleets, and the Deschênes Group, specializing in building mechanics and automobile parts.
To write his book, Carl Simard interviewed the managers of the five companies.
Two IPOs for GDI
GDI was first listed on the stock market in 2007 before being privatized in 2012 with the help of the Toronto investment firm Birch Hill, then reintroduced on the stock market in 2015. CEO Claude Bigras states in the book that GDI is IPO for the wrong reasons both times.
“These public offerings were, in my opinion, inevitable, but regrettable, as they were probably premature and the funds raised did not contribute directly to the progress of our company. They were used to buy out the founders and some initial investors. This money was never invested in the company’s coffers. »
Claude Bigras admits, however, that the fact that GDI was listed on the stock exchange had the advantage of honing the company’s administrative processes and increasing notoriety, “which facilitated several acquisitions,” he says.
Unwanted pressure for MTY
The CEO of the MTY Group, Éric Lefebvre, speaks of a premature listing on the Stock Exchange for the operator of multiple fast food concepts, “whose pressure to deliver short-term results may have provoked actions incompatible”.
The author of the book also reports a clear comment from one of the founders of MTY, Stanley Ma.
We were naive to believe that the stock market was an adequate vehicle at the time.
Stanley Ma, co-founder and former president of MTY, quoted in the book In the furrows of Quebec flagships
“Despite the determination of its leaders, the organization was simply not mature enough for the stock market context. The day after their registration, the financial sirens who claimed to be rowing with them had already left the boat,” writes Carl Simard in the book.
MTY’s shares were first listed on the Vancouver Stock Exchange at the turn of the 1990s before subsequently migrating to the Toronto Stock Exchange.
Adventure in technology
In interview with The Press, Carl Simard deplores still seeing companies listed on the stock market “for nothing”. He cites the example of the Montreal payment solutions provider Nuvei, which has just announced an operation to close its capital, and Lightspeed, another Montreal financial technology company.
Some will also learn from reading the book that MTY ventured into the field of technology in the 1990s. MTY marketed parking management systems and photocopiers. This business segment even represented up to 50% of MTY’s revenues at the time.
Serial acquisitions constitute a determining factor in the emergence of four of the five companies in the book. Interest rates that have remained at historic lows for years have made it easier to close many deals by lowering the cost of invested capital, and Mr. Simard points out that executives must now navigate a cycle where interest rates are likely to be higher than in the past.
Carl Simard says he does not claim to create a list of champions of value creation or the best managers. Rather, he says, his book is a tool to sharpen one’s bearings when identifying companies that stand out in a lasting way.
The financial entrepreneur admits that he would have liked Alain Bouchard to agree to participate in his book because Couche-Tard – of which Mr. Bouchard is the co-founder and executive chairman of the board of directors – is certainly another exemplary company. Just like CGI, he adds.
With Quebec sauce
Carl Simard says his experience makes him realize that local entrepreneurs have particular traits.
Quebecers have a different way of doing business when it comes to customer relations. We have a more humanist way of doing things. We combine humanism with capitalism.
Carl Simard, co-founder of the asset management firm Medici
“There is a special model in Quebec. Respect for the world. Entrepreneurs respect their suppliers,” believes Mr. Simard.
Medici is not necessarily a shareholder in the three publicly traded companies cited in the book. Carl Simard likes these companies, but says he is doomed to beat the market as a portfolio manager. “So even though it is an exemplary company, you have to buy at a reasonable price. »
Some 2,000 copies of the book were printed for distribution to clients and friends. The book will be offered free of charge in electronic version on the Medici website.
In the furrows of Quebec flagships
Medici