Corporate Finance in Atlantic Canada

Commentary on corporate finance issues for small- & mid-market private companies in Atlantic Canada

Archive for July 2011

Do you want your kids to work in your business?

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http://www.theglobeandmail.com/report-on-business/small-business/exit/john-warrillow/why-give-your-business-to-your-kids/article1573985/

The above is a link to an interesting Globe & Mail article on why you may or may not want to give/sell your private business to your children.  Essentially, the arguments can be broken down into two camps:  those that believe in the family business and the emotional/personal connection it brings to the family, and those that insist family management transitions are doomed to sabotage the business, so sell the business and gift the money to children rather than giving them the business.

An emotional and personal topic for those of you in family businesses … so what do you think?

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Written by Dan Jennings

July 28, 2011 at 5:54 pm

Posted in CF Musings

When is the right time to sell?

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As with most things in life, timing of when to sell your business is everything (well, not quite everything … there are some “minor” details like price and terms!).  Here are my thoughts on the question, when is the right time to sell your business?

In some ways, selling your business is not that different from selling your house — in that there are some physical steps you can take to prepare — cleaning up the balance sheet, strengthening non-owner management and maintaining capital assets are all key steps to take in advance of selling your business.  In addition, since tax is a fundamental reality in selling a private Canadian company, proper tax planning well in advance of a sale can often save entrepreneurs hundreds of thousands of dollars by maximizing after-tax proceeds.

Different industries go through consolidation trends at different points in time.  For example, the insurance broker industry has been (and continues to) consolidate (see my earlier posts on this sector); for an independent broker, now is the time to “cash out”.  Will that still be the case 3 years from now?

Typically, the time to sell is when the economy is “firing on all cylinders” and the M&A market is active with more prospective buyers than there are quality companies for sale.  Notwithstanding the long post-recession recovery, the current Atlantic Canadian marketplace is clearly primed as a “sellers market” given historically low interest rates and a (once again) competitive lending market.  Also, many strategic industry buyers have returned to the M&A market and many of them are seeking acquisitions to cover Canada coast-to-coast, hence the attractiveness of some Atlantic businesses.

Ideally, you sell when you’ve just finished your strongest year ever with record profits and an under-leveraged balance sheet, and even better if it is the second or third strong growth year in a row.  Non-financial milestones can also be significant value drivers, such as the successful launch of a new product or a recent large contract “win.”  Realizing on recent major investments, such as an under-performing new branch, can be challenging if those investments are made too close to a sale negotiation.

When advising entrepreneurs on the sale process, I always ask clients to focus on the non-financial reasons they want to sell, such as health issues, a waning level of enthusiasm/energy for the business or comfort with a particular buyer.  The sale of an asset like a private business is an emotional and psychological step that you as an entrepreneur must be ready to take for a variety of reasons, and the price/terms should not be the only reasons.

Have you consulted with an M&A advisor as to when is the right time for you to sell?

Written by Dan Jennings

July 21, 2011 at 11:12 pm

Posted in CF Musings

What are you passionate about in your career?

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http://wellnesslawyer.com/did-you-hear-the-one-about-the-wellness-lawye

The above is a link to an interesting blog about a corporate lawyer contact in Fredericton who has left the practice of law to pursue other interests that he is more passionate about.

It got me thinking about my passion for M&A in Atlantic Canada … yes, I’m passionate about helping small and mid-market entrepreneurs (SMEs) achieve success in their businesses and succession!

For some, that means helping them transition their business to the next generation (including the succession, valuation and financing challenges).  For others, it’s devising an exit plan, finding strategic and/or financial buyers and then using a competitive process to negotiate the best possible price and terms on a sale of their business.  For still others, it is assisting on the valuation, negotiation and financing of an acquisition, so helping a successful business leverage their success to grow by acquisition.

For many SMEs, these transactions happen only once or twice during their career, so they typically require help in navigating the complex maze of valuation/pricing/M&A.  It is very gratifying to me personally, for example, to help a successful entrepreneur sell his business successfully that allows him and his family to take the next step of retirement.

So, what are you passionate about in your career?

Written by Dan Jennings

July 12, 2011 at 1:13 pm

Posted in CF Musings

Medical supplies deal

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http://www.medimart.com/images/Medical%20Mart%20Press%20Release.pdf

St. John’s, NL’s Northern Medical Supplies has sold to Ontario-based Medical Mart.

More industry consolidation, and in particular, this deal shows the interest “mainland” companies have in getting into the booming St. John’s economy.

Written by Dan Jennings

July 7, 2011 at 1:23 pm

Sports retailer acquisition

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http://thechronicleherald.ca/Business/1252166.html

Nova Scotia’s Cleve’s Source for Sports has acquired Moncton, NB’s Maritime Sports and Repair.

Another complementary acquisition in a competitive retail environment.

Written by Dan Jennings

July 7, 2011 at 1:12 pm

Should You Let People Pick Your Brain for Free?

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http://goldenmarketing.typepad.com/weblog/2011/05/should-you-let-people-pick-your-brain-for-free.html

This is an interesting post on a blog I received through LinkedIn.

As professionals, many of us are often asked for “free advice” or “can I pick your brain for a minute?”  Some folks never intend to pay for this “free” advice, while others don’t even think they are asking for something for free.

The above blog references an article that states that professionals shouldn’t respond to these types of requests.  However, I tend to agree with the blog author that such conversations are a form of business development — you just have to learn to gauge when someone is just using you and your expertise versus those that offer a legitimate opportunity for future work.  Besides, it’s a small world — you never know how/when sharing a nugget of free (but insightful) information will turn into an assignment down the road.  And even if it never does, it’s just payback for when I’ve asked for “free” advice sometime in the past!

Written by Dan Jennings

July 5, 2011 at 5:01 pm

Posted in CF Musings

Industrial cleaning acquisition

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http://www.thechronicleherald.ca/Business/1251255.html

Dartmouth, NS-based Envirosystems has acquired Crosbie Industrial Services and related Newfoundland Environmental Services of St. John’s, NL, forming the largest industrial cleaning company in Atlantic Canada.

Envirosystems is owned by Nova Scotia’s Hennigar family (formerly part of the Jodrey/Annapolis group of companies).

Sounds like another strategic (and synergistic) acquisition.

Written by Dan Jennings

July 1, 2011 at 11:44 am