Sometimes a husband and wife don't need to say anything to know they're both thinking the same thing.
Martin Connell and Linda Haynes were on the phone in the kitchen of their Toronto home. On the other end of the line were representatives of a food company that had made an offer for Ace Bakery, the artisanal bread-maker the couple had started a decade earlier. The company grew to become one of Canada's top independent bakeries, with restaurants, supermarket chains and consumers stocking up on the more than 25 varieties of its European-style breads. Ace had recently begun shipping partially baked and then flash-frozen bread to grocery stores in Ontario, New York state and Michigan, but the couple knew further expansion would require more capital, more time and more sacrifice. They weren't sure they were up for it. And here was a keenly interested buyer that needed an answer. Now.
Connell and Haynes said no. "We just knew it wasn't going to be the right deal," says Haynes.
But that was five years and millions of dollars in sales ago. Since that tense phone call, the business has doubled in size, with 300 employees, seasoned managers, and annual revenues approaching $50 million and growing at a double-digit rate. What's more, Ace has become a major supermarket brand. So when the couple found themselves facing a similar dilemma last year—whether to inject the cash and effort needed to penetrate more markets in North America—they knew they were sitting on a much more valuable asset. They were also approaching retirement age (she's now 60, he's 66). "It was going to take a heck of a huge push to get the business to the next level," says Haynes.
It was time to sell. The trick was to get the deal done this time.
Ace was born out of Connell's habit of spending weekend mornings at the couple's country house near Caledon, Ontario, baking bread with his young daughter. It soon turned into a hobby, then a passion, with Connell striving to create the perfect baguette. The couple built a small bakehouse on the property and, after visiting bakeries in North America and Europe, started to think about launching their own bread-baking business.
In 1993, they opened a small bakery on the western edge of downtown Toronto using about $250,000 of their own money. Initially, the duo just wanted to raise funds for Calmeadow, their microlending charity. But Ace was a smash hit with Toronto gourmands and, four years later, they relocated to a 23,000-square-foot facility (which has since doubled in size) in north Toronto. Haynes, a former television producer, focused on product development and marketing while Connell oversaw operations. Within a decade, Ace's breads were being sold in grocery chains such as Loblaws in Canada and A&P in the United States, served in many of Toronto's best restaurants, and shipped partially frozen to luxury resorts in the Bahamas and elsewhere.
After the aborted sale in 2003, Connell and Haynes brought in Birch Hill Equity Partners, a Toronto-based private-equity firm, as an investor to help finance the ongoing expansion. Then, two years ago, they hired Philip Shaw, an experienced bakery operator from California, to take over the management of the business. His arrival allowed the founders to step further back like they'd wanted to, and Haynes threw herself into writing cookbooks while Connell grew increasingly involved with various charities.
But as Ace's growth continued unabated, the pair was soon back at a crossroads. By the summer of 2007, Ace needed a new capital injection to stay on its expansion path, and Haynes and Connell just didn't want to take on that gruelling task. The distribution and product mix were well established, and Ace was a household name with consumers in several North American cities—a rarity for a specialty bakery. "Most artisan bread companies end up being suppliers to private labels," says Connell, "but we were able to maintain our brand presence [in stores]. That's very attractive to buyers."
