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Ottawa’s Kroon Electric Corp. raises US$50M to power global expansion drive

June 18, 2024
4:51 PM
ET

Kroon Electric Corp. announced last week it has received a “significant growth capital investment” from BDC Capital, the investment arm of the Business Development Bank of Canada, and a group of investors led by U.S.-based serial entrepreneur George Fechter.

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An Ottawa-based electrical services company has raised more than US$50 million to fuel its push to create a billion-dollar global consulting and engineering consortium. Kroon Electric Corp. announced last week it has received a “significant growth capital investment” from BDC Capital, the investment arm of the Business Development Bank of Canada, and a group of investors led by U.S.-based serial entrepreneur George Fechter. Founded by Cornelius Kroon in 1976, Kroon Electric is now owned and operated by Kroon’s children, Michael and Audrey. Originally a construction company that built houses and small commercial projects, the firm has evolved into a services and engineering firm with 100 employees and offices in Ottawa, Kingston and Montreal. Kroon Electric maintains, refurbishes and replaces electrical assets such as high-voltage transformers, substations and systems that provide uninterrupted power to buildings when main electricity sources fail. Michael Kroon says the firm’s revenues have tripled in the past six years as the push to make office and industrial buildings more energy-efficient means infrastructure such as boilers that previously ran on natural gas or other fossil fuels is increasingly powered by electricity. “Part of the challenge that many buildings face is that their aging electrical distribution (infrastructure) cannot support the transition to decarbonization,” says Kroon, who has been president of Kroon Electric since 2001. The family-owned firm now has contracts with “almost all of the largest buildings in Ottawa,” Kroon says, including several local hospitals. Kroon Electric’s engineers, technicians and electricians are constantly testing breakers, transformers and other key electrical equipment at those sites. Meanwhile, they are also sought-after for their expertise in areas such as whether a building’s electrical infrastructure is robust enough to support EV charging stations, solar panels and other emerging green-energy technology. It’s a highly specialized industry, Kroon notes, and one that’s seeing an “exponential” rise in demand for its services. “Ottawa doesn't know us very well, but people in our industry know us very, very well,” he adds. As Kroon Electric’s sales ballooned, so did its attractiveness as a potential acquisition target. In the past few years, Kroon says, he’s received “weekly” calls from U.S. organizations that were angling to make an offer for his firm. “It would have been very easy for us to just sell and have some management team come and take over,” he admits. Instead, Kroon and his sister, Audrey Lowther, decided to flip the script. Last fall, they met with BDC Capital to discuss their grand plan to start acquiring other firms in the electrical services space with the goal of creating a “billion-dollar company.”

New holding company

Meanwhile, they began rounding up investors south of the border – including Fechter, a veteran entrepreneur whose electrical services company, TEGG, works with more than 90 franchisees around the world, including Kroon Electric. Now, instead of becoming yet another Canadian company to get swallowed up by a larger U.S. counterpart, the Ottawa firm is one of the cornerstones of a new organization called BCES Global. BCES – short for “best-in-class electrical services” – is an Ottawa-based holding company headed by Kroon, Lowther and TEGG co-founder John Sargent with a goal to consolidate smaller electrical services providers under one roof. Officially launched last week, BCES Global immediately announced it was acquiring three U.S.-based businesses with proceeds from its multimillion-dollar fundraising drive. Including Kroon Electric, the four companies under the BCES umbrella have a total of 450 employees and combined annual revenues in excess of US$60 million. Kroon says BCES wants to keep acquiring additional businesses “at a cadence of one company every quarter” as it strives to achieve to become a “global entity.” He predicts BCES Global’s annual sales will surpass US$300 million within five years and “hit the billion-dollar mark within 10 years.” “The industry itself is at a turning point,” Kroon explains. “Most of the owners of these businesses are near retirement age and they don’t really want to continue expanding or growing their depth of services. There is no one taking over these companies. “Demand is rising dramatically and the market is being serviced by fractional businesses. It’s not really an industry where you have consolidation yet. Our objective is (within) the next five years to be in Europe and all over the U.S. and Canada.” A lack of capital is often a major barrier to building world-leading companies in Canada, Kroon says. Now, he hopes to show entrepreneurs who are tempted to sell their businesses there is a “door No. 2” that doesn’t require them to give up their hard-earned equity and instead can be a springboard to international markets. “It’s really hard to get capital in Canada,” Kroon concedes. “I was able to find millions of dollars in the U.S. to do this. It’s hard to get that kind of money in Ottawa, which is too bad.”