Growth equity: A partner for what comes next
Owners of Canadian mid-market businesses often reach a point where the next chapter requires more than incremental change. They may want to accelerate growth, buy a competitor, prepare the business for succession, or take out some liquidity after years of reinvesting in the company—while keeping the long-term vision intact.
At this stage of the journey, the question is rarely just “How do I raise capital?” It becomes “How do I find the right partner to achieve my ambitions?” Many owners want a partner who brings financial flexibility, strategic perspective, and aligned incentives—particularly as decisions become more complex and the responsibility of carrying them rests on the owner alone.
That’s where growth equity comes in. In a growth equity transaction, the owner sells a minority stake in the business and brings in a partner focused on building value over time—supporting the owner’s priorities while the owner remains in control. Done well, it can help strengthen companies, support succession and contribute to creating more Canadian champions.
Growth equity partner companies outpaced peers in revenue growth, EBITDA margin, employment and productivity growth.
Patrick Carpentier
Principal, Growth Equity, BDC
How growth equity works
Growth equity involves selling a minority stake in the company— typically 10 to 49% in the case of BDC’s Growth Equity Partners. The investment’s time horizon is usually longer-term; a five- to 10-year expected realization is common.
Beyond capital, growth equity is about partnership. As companies grow or transition, owners often find themselves carrying increasingly complex decisions and a heavier sense of responsibility. A minority partner can help de‑risk the journey—bringing experience, challenge and support to supplement the management team, while remaining aligned with the owner’s long‑term vision and priorities.
Depending on the company’s priorities and stage, a growth equity partner may support initiatives such as:
- Governance that supports growth
Strengthening board effectiveness, decision rights, and reporting so the company can scale with clarity. - Leadership and talent
Helping owners attract, develop and retain the right leaders as the organization grows. - Operating discipline and metrics
Improving how performance is measured and managed to support execution. - Strategy and value creation planning
Pressure-testing growth plans, market entry, product strategy and pricing. - M&A support (when relevant)
Helping define acquisition strategy, evaluate opportunities and execute transactions.
In BDC’s case, the program also incorporates environmental, social and governance (ESG) factors throughout the process, along with diversity, equity and inclusion (DEI) best practices.
What is the impact from growth equity?
Growth equity can help entrepreneurs pursue growth or transition, and in many cases, it supports longer-term Canadian ownership by providing companies with what they need to scale.
In the case of BDC’s Growth Equity Partners, a analysis we conducted in 2024 showed that the companies we partner with outpaced benchmarked peers and S&P/TSX Index-listed small companies in terms of revenue growth, EBITDA margin, employment and productivity growth.
Revenue growth, for example, was 13.6% versus 10.9% for peers and 9.6% for TSX small companies.
Which situations is growth equity suited for?
Growth equity isn’t for every business. Companies must usually have:
- A proven business model and demonstrated products or services.
- An experienced and financially committed management team.
- A history of stable positive cash flow.
In practice, BDC Growth Equity Partners often works with mid-market companies roughly in the range of $10 million to $500 million in revenue with at least $3 million of EBITDA.
Just as important as the business is the owner’s mindset. Growth equity is ideal for owners who have a collaborative approach, want to drive growth and are focused on achieving their goals. Common scenarios include:
- Transition planning
A business owner may want to pass the business on to management or family while ensuring the business is set up to succeed. Growth equity provides capital and partnership to strengthen governance, leadership and operations—helping the business become more resilient before the baton is passed. - Acquisition
An entrepreneur wants to buy another business, but doesn’t want to burden the business with maximum leverage. Minority equity gives them the capital to do so, while also bringing in an experienced partner to help plan and execute the acquisition.
This can be valuable for entrepreneurs with no acquisition track record, but also for experienced acquirers, who can get help to scale their M&A program. - Rapid growth
An entrepreneur may see an opportunity to invest in a major growth initiative—new capacity, new markets, new products. Growth equity can provide patient capital and a partner who can help pressure-test the plan, track execution and scale the organization responsibly. - Extracting liquidity
An entrepreneur may want to take some capital out of the business without selling it completely. Partnering with growth equity can allow an owner to partially de‑risk their personal net worth while continuing to lead the company and participate in future value creation.
In practice, liquidity events are often linked to growth, acquisition, or transition planning. They can also arise when inbound interest—such as offers to acquire a majority or all of the business—creates a natural moment to consider alternatives to a full sale.
Growth equity supports owners at different stages—whether they’re scaling, transitioning, or preparing the business for the next generation
Patrick Carpentier
Principal, Growth Equity, BDC
What to expect when exploring growth equity
When exploring growth equity, the first question is whether there is strong fit on business fundamentals and on goals. Early conversations and information sharing focuses on understanding the company’s history, ambitions and priorities, and whether a minority partnership could help achieve them.
In the case of BDC Growth equity, the opportunity is also validated against our investment criteria:
- proven business model
- experienced management
- track record of positive cash flow
- business and investment size
If there is alignment, the next step is typically an initial proposal (often through an indication of interest or letter of intent) that outlines valuation approach and key partnership terms. From there, both sides take the time to validate the business plan through financial, commercial, legal and operational due diligence and to finalize legal documentation that will govern the partnership.
After closing, the partnership officially begins. The owner remains in control, and the minority partner supports long-term value creation in ways that fit the company’s needs—whether that’s governance, leadership, execution discipline or M&A. At BDC, one team stays involved from first conversation through post-close, which helps create continuity and long-term commitment.
That continuity matters. As companies grow or transition, new challenges inevitably emerge. Having a consistent team—investors with experience across growth, succession, and transformation—can help management navigate uncertainty, avoid common pitfalls, and stay focused on building long‑term value.
Does the owner stay in control of their company?
Yes. In a growth equity partnership, the investor is a minority shareholder, and the business continues to be led by the owner and management team. Day‑to‑day operations remain with the people running the company.
A well‑structured partnership puts clear governance and decision rights in place from the outset. This typically means agreeing upfront on:
- which decisions management makes independently
- which decisions benefit from board discussion
- which matters require shareholder alignment
This clarity helps avoid surprises and friction. It clarifies how decisions are made, supports good oversight at key moments and helps owners move the business forward with confidence.
Does having an investor slow down decision-making?
Some entrepreneurs worry that having a minority investor will slow down decisions or reduce their flexibility. At BDC, our Growth Equity Partners team includes investment professionals experienced at working with boards and management teams to drive sustainable growth.
They know the need for quick decision-making. A lean deal team typically gets to know the company long-term and can rapidly respond to any situation. Don’t hesitate to contact us if you think you would like to work with us.