Corporate Finance in Atlantic Canada

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

Posts Tagged ‘buying a business

Different types of buyers

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In general, there are 3 groups/types of buyers for mid-market private businesses:

  1. Strategic.  Such buyers are often called industry buyers because they are typically in the same (or related) industry as the target.  These buyers tend to be larger companies seeking to consolidate your business with their existing operation, and so, they often have access to synergies from combining the two businesses.  These synergies can mean that such buyers can afford to pay more than the below types of buyers (i.e. they can pay a strategic premium over/above standalone financial value).  These buyers are often an option for mid-market businesses and less so for small businesses, but that can depend on the industry.
  2. Financial.  Financial buyers are aplenty in the Atlantic marketplace, given the prevalence of debt and equity capital.  These buyers have access to capital and either financial or management expertise, but aren’t currently operating in the industry of the target (and therefore don’t have synergies to allow them to pay the above premium price).  Such buyers range from formal private equity funds (such as the Sobeys/McCain-founded SeaFort Capital), to informal groups of owners seeking to invest in businesses and their management teams, to individuals who have a dream of being an owner (and have never acquired a business before).  In today’s market, there are many more financial buyers than business opportunities, and so these buyers/investors are looking in almost all industries and sizes in Atlantic.
  3. Management.  Existing employee or senior management groups have always been an option to acquire your business.  Historically, the challenge was often that such buyers didn’t have capital, and so often required significant vendor financing assistance.  In recent years, that is no longer the case, due to the availability of capital (both debt and equity) to assist management teams in acquiring the businesses they work for.  While management buyers can’t do the above strategic price, they can pay a fair price and therefore are a credible alternative.

Stay tuned for more blog entries on each type of buyer.

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Written by Dan Jennings

June 12, 2019 at 9:23 am

CRA announces MBO

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http://thechronicleherald.ca/business/1596714-don-mills-reflects-on-40-years-with-cra-and-looming-retirement

The Chronicle Herald is reporting that Don Mills has sold Corporate Research Associates (CRA) to three members of his management team.   Halifax-based CRA is well known in the market research sector and has offices throughout Atlantic as well as Ottawa and Bermuda.

This is another example of a management buyout (MBO), where existing management acquire the business they work for.  Many entrepreneurs are surprised to know that MBOs are a viable succession/exit alternative and that’s because of the prevalence of capital in the marketplace to fund such acquisitions.  Every financial institution likes to fund MBOs and there are also plenty of private equity funds interested in backing management teams.

Written by Dan Jennings

September 13, 2018 at 8:36 am

Pet food consolidation in NS

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http://danecreekcap.com/dane-creek-capital-corp-acquires-non-manufacturing-pet-assets-of-natures-way-canada/

Toronto-based Dane Creek Capital Corp announced that it is acquiring Dartmouth’s Nature’s Way’s non-manufacturing pet assets and brands.  Nature’s Way will continue to manufacture the dog and cat supplements for the new owner.

Dane Creek Capital is a merchant bank focused on the pet industry.  This is its third investment in NS this year, after Midgard Insect Farm and Dockside Pet Products.

Written by Dan Jennings

July 27, 2017 at 9:09 am

More dairy consolidation

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http://www.newswire.ca/en/story/1386557/agropur-cooperative-reaches-agreement-for-the-purchase-of-northumberland-dairy-cooperative-dairy-assets

Quebec’s Agropur is continuing its consolidation of the dairy industry by acquiring the dairy and food distribution business of Miramichi, NB-based Northumberland Dairy Cooperative.

Written by Dan Jennings

July 14, 2014 at 6:53 pm

The New Retirement – Starting a Small Business?

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http://sbinfocanada.about.com/b/2013/06/28/the-new-retirement-starting-a-small-business.htm

Interesting article on a survey of baby boomers by TD Bank.

“54 percent of boomers (those born between 1946 and 1964) have started or considered starting a small business prior to retirement … The top reasons boomers consider starting their own business before retiring were:

  • being their own boss (58%),
  • having the opportunity to make more money (53%),
  • and having a sense of personal achievement or pride (50%).”

If you are one of those boomers considering starting a small business, you might want to consider buying an existing one instead.  Check out our website for plenty of information on the entire process of buying a business.   http://www.raymondyuill.ca/buying.html 

Written by Dan Jennings

August 22, 2013 at 4:50 pm

Do you want to be an owner? Buying a business 101

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http://www.profitguide.com/manage-grow/strategy-operations/acquisitions-buying-a-business-30314

Check out this article on Profitguide.com about buying a business.  Some good ideas, suggestions and reminders here, particularly the one about not letting a vendor walk away after the transaction.  For risk-mitigation reasons, it is critical that the vendor be motivated to assist in both the transition and medium-term future success of the newly-acquired business, especially for a small business.

The article doesn’t discuss that, in my experience, many lenders will also insist that the vendor be contractually obligated to remain in some (limited) way post-transaction, to assist the buyer in maintaining customer and employee relationships.  The details of how long and how much they get paid are, of course, open for negotiation.  Just makes good business sense for the acquirer to insist the vendor be involved post-transaction (but not full-time employment, in many cases), particularly for small business transactions (where the owner is often the key manager).

If you want more information on the entire process of acquiring a business, check out the ‘Buying a Business’ section of our website:  http://www.raymondyuill.ca/buying.html

Written by Dan Jennings

June 14, 2013 at 4:52 pm

Buying a business

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http://www.entrepreneur.com/article/225090

Interesting article from Entrepreneur magazine on some things to ask before buying a business, almost an informal ‘due diligence’ checklist (of sorts).

For more content on the entire process of acquiring a business, check out the ‘Buying a Business’ section of our website at:  http://www.raymondyuill.ca/buying.html

Written by Dan Jennings

May 3, 2013 at 2:26 pm

Posted in CF Musings

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