Corporate Finance in Atlantic Canada

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

Archive for February 2013

Is your business ready to move on without you?

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http://www.theglobeandmail.com/report-on-business/small-business/sb-managing/succession-planning/is-your-business-ready-to-move-on-without-you/article8183682/

Interesting article in the Globe and Mail, espousing the same point I keep making to clients:

“The big succession question is how long the owner can step away from the business.  If she goes down to Florida and stays for a week, but she’s on the phone checking orders and other details, there is no business to sell.  If the owner says “I go to Florida and stay for a month” – or three – you know it can run without her and there may be an attractive company for sale.”

And this is the key challenge for small businesses in the Maritimes, in my experience … i.e. separating the business from the owner so that we can demonstrate to a potential buyer that the business can survive and thrive after the owner transitions out post-transaction.

Written by Dan Jennings

February 17, 2013 at 10:02 am

Farmers Dairy transaction

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http://atlantic.ctvnews.ca/agropur-and-farmers-dairy-co-operatives-to-merge-1.1151890

Bedford, NS-based Farmers Dairy has announced a merger with a significantly larger Quebec-based dairy, Agropur.  Both are farmer-owned cooperatives and the stated intent is to maintain the Farmers brand in the Maritimes.  The transaction is expected to close April 2, after the respective shareholder meetings and approvals.

Written by Dan Jennings

February 12, 2013 at 10:23 am

Posted in Announced Transactions

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Another crane deal for SeaFort

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http://thechronicleherald.ca/business/681602-seafort-s-crane-business-going-up

The Sobey/McCain families-backed private equity fund SeaFort Capital announced another crane rental acquisition, Pictou’s Partners Cranes.  This is in addition to the AW Leil Crane acquisition last fall.

As the private equity fund has made clear, SeaFort’s strategy is to acquire “old economy” small and mid-market businesses.

Written by Dan Jennings

February 12, 2013 at 10:15 am

Posted in Announced Transactions

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Investment management deal

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http://thechronicleherald.ca/business/660978-moncton-investment-company-acquires-new-brunswick-assets-firm

Moncton’s Louisbourg Investments has acquired Fidelity Asset Management, also of New Brunswick.  Fidelity specializes in private client investment management.  Louisbourg, owned by Assumption Life in Moncton, has offices in Moncton and Halifax.

Written by Dan Jennings

February 8, 2013 at 5:03 pm

Posted in Announced Transactions

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Some of the questions you’ll be asked when selling your business

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One of the most intimidating aspects of selling your business can be facing the barrage of questions either during the various meetings (or presentations) you’ll be having with potential acquirers, or later in their formal due diligence process.  Of course, every meeting will be different, but here are some questions you can expect to be asked when you’re in the hot seat (particularly from strategic buyers):

1. Why do you want to sell your business?

It’s a slippery question because if your business truly does have a bright future—and you want the buyer to believe that’s the case—the obvious question is:  “Why do you want to sell it, and why do you want to sell it now?”

2. What is your cost per new customer acquired?

The potential acquirer wants to find out if you have a predictable, economical and scalable formula for finding new customers.

3. What is your market penetration rate?

The acquirer, with an eye to future growth, is trying to understand how big the potential market is for your product or service and what part of the field remains to be harvested.

4. Who are the critical members of your team?  Or, how can the business survive when you the owner retires after the sale?

The acquirer wants to understand the breadth and depth of your team and determine specifically which members need to be motivated and retained post-purchase.  In small businesses in particular, the buyer needs to understand how the existing owner can transition out of the business (i.e. the business is not overly reliant upon the owner).

5. Who buys what you sell?

Strategic buyers will be searching for any possible synergies between what you sell and what they sell.  The more you know about your customer demographics, the better the buyer will be able to assess the strategic fit.

6. How do you make what you sell?

This question is asked in an effort to size up the uniqueness of your formula for creating your product or service.  Potential buyers want to know if you have any proprietary systems that would be hard for a competitor to replicate.  For various reasons, they will also want to understand if the creation of your product or service is dependent on any one person.

7. What makes your product truly unique?

A buyer is trying to understand how big the moat is around your business and what kind of protection it offers from competitors who may decide to compete with you in the future.  What have you done to safeguard yourself against the competition?

8. Can you describe your back-office setup?

Most strategic buyers will try to understand how easily they can integrate your back office into their operation.  They’ll want to know what bookkeeping and billing software you use, how customers pay, and how you pay suppliers.

Of course, this is not an exhaustive list, but it’s a good start when you’re preparing to represent your company to your potential buyers.

Written by Dan Jennings

February 6, 2013 at 5:52 pm

Posted in CF Musings

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Rare tale of family business survival?

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http://www.theglobeandmail.com/report-on-business/small-business/sb-growth/day-to-day/halifax-seed-company-is-a-rare-tale-of-family-business-survival/article7875488/

Good article from the Globe and Mail on Halifax Seed Company and the Tregunno family transition.

I’m not sure family business succession is exactly “rare”, but it is certainly challenging.

Written by Dan Jennings

February 5, 2013 at 10:53 am

Posted in CF Musings

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