Corporate Finance in Atlantic Canada

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

Archive for March 2013

Capital on the Sidelines

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https://cicbv.ca/welcome/

Check out this video entitled Capital on the Sidelines.  It’s posted by the Canadian Institute of Chartered Business Valuators, and is about the dramatic turnaround in capital availability since the fall of 2008.  Currently, it is estimated that there is $1 trillion of capital in Canada waiting on the sidelines for deals, across all categories and sizes.

This is something I’ve written about here several times.  There is plenty of capital to fund M&A in our local market, and I’m not talking about billion dollar deals.  In the local small and mid-market space, there are many more financial buyers than sellers (and the buyers have most of the banks lined up willing to lend them capital to fund the deals).

So if you have a successful, profitable business, don’t let anyone tell you there aren’t any qualified buyers.

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Written by Dan Jennings

March 31, 2013 at 9:10 am

A local merger

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http://thechronicleherald.ca/business/1108867-two-halifax-tech-companies-consolidate-their-business

Two Halifax companies say they are merging — GBS Mobility (a Telus mobility dealer) and PC Medic (a hardware/software IT provider) — “to become a small- to medium-sized business trusted adviser for wireless and computer solutions”.  The owners say they will be keeping the brands separate but will be seeking cost synergies from combining.

Written by Dan Jennings

March 26, 2013 at 12:56 pm

Posted in Announced Transactions

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The first in our new webinar series – Built to Sell

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http://www.raymondyuill.ca/rywebinarseries.html

Some of you may have read John Warrillow’s book Built to Sell, a good read on the process John went through to improve his business so that he could sell it.  On April 16, we’re hosting a live webinar that John is giving for our contacts in Nova Scotia on the themes from his book.  Check out our website for more information and the link to register for this free webinar (the first in the Raymond Yuill Information for Entrepreneurs series).

Written by Dan Jennings

March 23, 2013 at 11:09 am

Posted in CF Musings

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Selling something you love

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http://synergybiznwa.com/2013/03/how-to-sell-something-you-love/

A nice post from an advisor who draws analogies between selling her horse and later selling her business … “how to sell something you love”

For most entrepreneurs, selling their business will be a very emotional decision.

Written by Dan Jennings

March 22, 2013 at 1:32 pm

Posted in CF Musings

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Warren Buffett plugs business valuation

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http://www.forbes.com/sites/steveparrish/2012/08/14/if-you-value-your-business-you-should-value-your-business/

One doesn’t often get a mainstream article promoting the science and art of business valuation, and in particular quoting Warren Buffett!

“At this year’s Berkshire Hathaway annual meeting,  Warren Buffett made a key point all business owners should pay attention to:  “If business schools could offer just one course, it would not be on stock trading, the efficient market hypothesis or modern portfolio theory.  Rather, B-schools should be encouraging students to learn the boring, but critically important, discipline of business valuation.”

“Valuing a privately held business can be complex, but the overall process can be simply explained.  A standard — what I’ll call “baseline” — business valuation seeks to address three basic questions:

  1. What is the value of the business’s assets?
  2. What is the value to an outside party of the firm’s ongoing business (for example: revenues, profits or brand)?
  3. What does the current market look like for similar businesses (comparable sales, what banks are lending on, etc.)?” 

And I’ll add, that the latter is the key for private companies … who will be interested in buying your business and how do they price similar businesses?

Written by Dan Jennings

March 16, 2013 at 10:56 am

Posted in CF Musings

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Vendor financing

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http://www.divestopedia.com/2/1134/sale-process/vendor-take-backs/vendor-financing-in-business-sales

Good article on why vendor financing (in various forms) is so common in small business sales.  However, while I don’t disagree with the author that there is plenty of bank/other financing out there so why should vendors finance deals at all, I believe he is missing the point … the market (i.e. buyers) are often in a position to dictate the terms of many transactions, and just because we (or our vendor clients) don’t think there should be vendor financing, does not necessarily make it so.  As he writes in his article, there are plenty of reasons why buyers want/need to mitigate their risk in small business acquisitions.

It is our job as M&A advisors to design a competitive sale process in which multiple bidders for a successful business can be convinced to minimize their demands for vendor financing (because if they don’t, another buyer will).  Having said that, the reality is that the majority of small businesses (where the owner is key to the business)  have some form of vendor financing in sale transactions … although the degree of financing (historically 25-30% of the price) has come down over the last decade or so, in most cases.

Written by Dan Jennings

March 13, 2013 at 3:19 pm

The Danger of Market Timing

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http://builttosell.wordpress.com/2013/02/01/the-danger-of-market-timing-the-sale-of-your-business/

Interesting article on trying to market time the sale of your business, i.e. selling at the peak of the economic cycle.  This article points out that if you sell at the peak of the cycle (which can often mean a higher multiple), but then invest the funds just before the decline in the equity stock market, you may in fact be worse off than selling at another point in the cycle.  Interesting way to think of market timing …

Written by Dan Jennings

March 12, 2013 at 9:36 am

Posted in CF Musings

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