M&A Activity in Canada

Do Canadians fall apart in the mergers and acquisitions space?  Have they missed getting out into foreign business acquisitions too? Not according to information on performance last year:
Canadian Mergers and Acquisition activity increased for the third successive quarter in Q4 with 302 transactions worth approximately $52 billion.  This represents an increase of 12% in the value of deals announced while the number of announcements increased by 9% over the previous quarter.  The Canadian banks and pension funds announced numerous transactions that contributed significantly towards increased cross-border Mergers and Acquisiton activity and a consistent pace of mega deals (deals valued in excess of $1 billion) in the quarter.
 Some interesting aspects of the Q3 results included the following:

  • Four of the five major Canadian banks announced large acquisitions for a total of $14.4 billion; three of the four acquisitions were of foreign businesses.
  • Almost all of the major Canadian pension funds announced transactions for a total of 12 transactions worth $8.8 billion.
  • Bucking a long-term trend, the value of Canadian-led acquisitions abroad exceeded that of foreign-led takeovers by a ratio of 2.5-to-1
  • Activity in the mega-deal segment was unchanged from the previous quarter at 9 transactions; total value of mega deals declined slightly from $28 billion in Q3 to $25 billion in Q4
  • The Real Estate, Oil & Gas and Industrial Products sectors were the key drivers of M&A activity in Q4 representing 59% of the overall transaction volume 

For more Mergers and Acquisitions information, please see our website:  http://www.loewenpartners.com/

Entrepreneurial capitalism is the spark behind every important advancement

Did you have a candle lit dinner on Earth Day? I find that gesture just like busy work given for homework, a nice gesture but, hey, let's get doing the real work. I think we should be lighting a candle for every entrepreneur in Canada, not feeling bad that we have power and doing a voluntary black out.
Let's be honest, electricity has been the biggest help to reducing the work load in the home, giving women more time to bring up more educated children. 
I get that Earth Hour is a lovely way to try and raise awareness about being stewards of the Earth, and I am for the idea, but the big dilemma is that electricity is what the whole world aspires to achieve. Doesn't it seem so hypocriticial and contradictory that we turn off what we have for one hour? Being from an African country where power outages were the norm, doing a voluntary power outage seems so...I dont' know...so Paris Hilton.
OK - so what do I suggest instead?
Here is my favourite Greenie talking about the value of electricity, why it is needed and perhaps another way of looking after the Earth without needing to go back to the cave light. He also talks about why 1st world people with our electricity use should not be telling other countries how to be green until we figure it out.



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Hans Rosling says, "Thank you, industrialization," he says. "Thank you, steel mill." "Thank you, chemical processing industry." If you listen closely, you can hear the startled laughter of Hans Rosling's audience. 
Some people think these life-altering inventions -- the washing machine, indoor heating, iPhones, are the result of some kind of magic pixie dust. They happened just because. Little elves. Random events. Fate. Anything but the truth.
Which is: entrepreneurial capitalism is the spark behind every important advancement in human knowledge, and is the single greatest reason why people's lives are getting better.

So, on Earth Day, I did the laundry and gave thanks that I am living in Canada. I also lit a candle for every green entrepreneur and linked up a solar entrepreneur with a Private Equity fund who might keep the cash flowing. That early stage solar company is one of the green sparks, one of the entrepreneurs already making a difference, and I want to do what I can to help those business owners. Wow, it is tough keeping the cash flow going. 
I asked Sarah Thomson, who is running as a Liberal candidate and who is a super entrepreneur and who's Facebook got me on this rant:
Sarah, I hope you will push for entrepreneurs to work on the issues brought up by Earth Day. Nothing wrong with a bit of back to the cave, dinner in the dark, as a nice sentiment, but I think that one hour in darkness on Earth Day gesture has run its course. 
Time to speak up to encourage the entrpreneurs in this country. (Liberals seem to only think corporatism.) Please bring back the focus on small business and not just restaurants and stores, which seemed to be the only type and level of business discussed at the Mayors' debates I heard.
On Earth Day, we should be thanking entrepreneurs and asking for their green sparks. And asking, as Government, how can the government get out of the way?
What do you think?

Do you have to be mercenary to survive?

Some South African leaders took advantage of the power they suddenly acquired in the heady days after Mandela's release, as the country moved towards democracy. One religious leader stole from his church and cheated on his wife, a smart TV presenter. She found love again with Adam Kahane who I met in the nineties when I was doing strategy with a fast growing South African bank. Kahane did a superb set of scenarios for the future and the whole country picked up his themes when discussing possible futures and the impact on business.
Now Kahane has published a book on love and power. He certainly saw first hand in South Africa those who used power but without love or respect for their constituents. This balance is something Adam believes is needed in business. Adam works with NGOs and Not for Profits and I know he began in Shell Oil where they did put ethics very high up on their list of values. He manages to articulate this tough balance very well and I recommend his book. Here in Canada, when I think of the senior bank people in TD or RBC, I have certainly seen that blend of patriot more than the mercenary. However, that South African bank where I was working when I met Adam was pure mercenary, and they are now a global bank with a solid bank balance. Their culture has mellowed and I am hosting one of their strategists in a few weeks here in Toronto. They are far from the polite Canadian bank culture but I would place my long term money on the South African, mercenary bank over the nect 30 years.
Here is more on Adam Kahane:

Adam Kahane’s book Power and Love: A Theory and Practice of Social Change(Berrett-Koehler, 2010) opens with a quote from one of Martin Luther King Jr.’s most famous speeches, his last presidential speech to the Southern Christian Leadership Conference. “Power without love,” said King, “is reckless and abusive, and love without power is sentimental and anemic.”
This is a concept that business leaders need to understand, because in times of crisis (and afterward), the people of an enterprise are put under a great deal of stress. Many people in major corporations today are still wondering if they will lose their jobs. A system that follows only the impulses of compassion and solidarity (which Kahane calls love) will lose its competitiveness; a system that follows only the impulses of resolve and purposefulness (which he calls power) will sacrifice its people heedlessly and risk its capability for growth and recovery. A mix of power and love, however, becomes a stance that a leader can hold, and this stance may, in the end, be the single most important factor in enabling a leader to accomplish great things.
 Despite the success of his South African efforts, many participants at Mont Fleur, and in the discussions that followed, found the premise of basing policy on harmony naive. As one African National Congress leader put it, “The only birds that matter here are [not ostriches and flamingoes but] hawks and sparrows!” It turned out that love-oriented solutions are almost impossible to sustain in the predatory atmosphere of any political or competitive power structure. To really make change happen, you need to balance love and power. During the following years, Kahane came to recognize the tension underlying this reality, and to develop some ways to resolve it. That is the basis of the courses he teaches on social change — for example, at the Alia Institute’s annual summer Authentic Leadership in Action program, where he and I are both on the faculty. Kahane sat down with me at last year’s institute, in June 2010 in Halifax, Nova Scotia; he is repeating the course this summer, at the 2011 Alia Institute in Columbus, Ohio.

Want to Pitch Your Company?

Here’s a great opportunity for early stage companies to raise awareness within the Angel and financial community. The Business News Network has a weekly show called “The Pitch”, hosted by the much-loved Andrew Bell.
I was on today at 11:30am, along with Rick Nathan from Kensington Capital. Rick is a great supporter of innovation and ran CVCA.
Quick question: what's the best way to win over BNN's esteemed panel of established venture capitalists and investors? Patriotic messages in Canadian themed greeting cards or the sweet taste of a warm, made to order cookie. Find out on The Pitch.
See Jacoline Loewen on BNN, The Pitch - click here to see the show: 


BNN The Pitch

Cloud Compliance is not that Obvious

We have a guest blogger, Vipool Desai, who is talking about Cloud Compliance. Loewen & Partners has to be compliant to the Ontario Securities Commission and this is a whole new take on the topic:

In the mid 80’s at a time when many small mom and pop businesses were just starting to apply computers in their operations, Apple came out with an endearing commercial:
Two older gentlemen who owned a fish and tackle shop were struggling over set up instructions for a new PC they had just purchased. They had difficulty understanding words like “port” and understanding instructions for installing the software. Finally, in the last scene, their administrative assistant popped her head in the office while the two fellows were still struggling. It was obviously night time by then, as seen through the window of the office. She told them she needed to go home and then pointed out, “at this stage, your computer is going to put us all out of business”. The men look up, dumbfounded.
Thirty years, later technology has advanced to such a stage that most businesses no longer require expensive in-house hardware or software. They just need a fast internet connection to plug into computing power available on the web. Physical servers with installed software are now kept in giant football size mega data centres throughout the world and operated by companies such as Amazon, Google and Microsoft.
Their computing power is available for rent by the month, week, day or even the minute depending on need. This trend, referred to as cloud computing, is now being applied by many global companies. Cloud computing allows operating companies to avoid the three greatest technology costs and challenges;

  1. costs of regularly administering internal hardware and software
  2. costs of running a business with obsolete internal hardware and software; and
  3. cost of regularly updating obsolete internal hardware and software.

If one replaces the words “internal hardware and software” in the above, sentence with “Compliance Policies, Procedures, Forms, Logs and Operating Protocol”, it perfectly encapsulates the cost of compliance for independent firms. The biggest compliance costs are:

  1. costs of regularly administering Compliance Policies, Procedures, Forms, Logs and
  2. Operating Protocol
  3. costs of running a business with obsolete Compliance Policies, Procedures, Forms,
  4. Logs and Operating Protocol; and
  5. cost of regularly updating obsolete Compliance Policies, Procedures, Forms, Logs
  6. Operating Protocol.

Registered firms often mistakenly assume there is a point in time when “compliance is under control”. This could be when their registration is complete, compliance manual updated or when they pass their most recent regulatory review. However, this assumption is as true as expecting that windows 97 is the last application program you will ever need. The effectiveness of a firm’s Compliance Structure will naturally drift due to changes in, regulation, the business, staffing, regulator focus, and industry changes.
For more information, please contact:
Vipol Desai, Ara Compliance info@aracompliance.com.

The challenge for owners to choose between power or money

An owner of a business who gives up more equity to attract co-partners, professional management, new hires, and investors builds a more valuable company than one who parts with little equity. More often than not, however, those superior returns come from replacing the founder with a professional CEO more experienced with the needs of a growing company. This fundamental tension requires founders to make “rich” versus “king” trade-offs to maximize either their wealth or their control over the company.
Owners seeking to remain in control would do well to restrict themselves to businesses where large amounts of capital aren’t required and where they already have the skills and contacts they need. They may also want to wait until late in their careers, after they have developed broader management skills, before setting up shop. Entrepreneurs who focus on wealth can make the leap sooner because they won’t mind taking money from investors or depending on executives to manage their ventures. Such founders will often bring in new CEOs themselves and be more likely to work with their boards to develop new, post-succession roles for themselves. They understand that they can be owners of the business, not managers.
Choosing between money and power allows entrepreneurs to come to grips with what success means to them. Owners who want to manage empires will not believe they are successes if they lose control, even if they end up rich. Conversely, owners who understand that their goal is to amass wealth will not view themselves as failures when they step down from the top job.
This is a profound shift for many family businesses that become trapped believing that only full ownership is acceptable.  These family owners are convinced that having financial partners is a sign of failure. In comparison, the family businesses who do decide to maximize wealth often end up preserving more money for their next generations. Smuckers Jam, Wrigleys, Coke, Thomson all morphed and brought in external partners with great success and longevity for the company but also for family wealth.

Can Goliath Work Like David?

In describing their biggest hiring frustrations, Owners/CEOs often mention hiring someone out of a big company who was not able to adapt to the challenges of a mid-sized company. One Owner recently told me about one of his hiring mistakes – a VP-level hire who had worked at IBM – as follows: “He didn’t know how to create something from nothing. It’s like if you already have a crank, he can crank, but he can’t actually build the crank.”
big challenge with hiring someone out of a big company is what one Owner called “the resource issue” – i.e., that the person is used to operating with a lot of resources. (“Big company” Goliath was used to having a full complement of armor and weapons, while little David had only a slingshot and the ability to improvise.) Another Owner said, “They have to realize that in a company with $30M revenues, they are the resource. They have to make everything happen themselves.”

QUESTION SUMMARY: In your experience, is it hard for people to transition from big companies to new ventures, or is this issue overblown? If it is hard, what are the biggest challenges, and what are the best ways to address those challenges?

Some big-company people can work well in mid-sized firms. What indicates which big-company hires will work out? The following characteristics were proposed:

  • Within the big company, the person has succeeded at a variety of very different jobs across many positions and units, which suggests an ability to adapt.
  • The person has had some international assignments, which often demand more entrepreneurial skills than do domestic ones.
  • The person has enough self-knowledge to know if she fits better in big companies or in new ventures, and what stage of a new venture’s life cycle would be the best fit. Relatedly, the person is aware that the situation is "radically different" in a new venture, regarding resources, financing, and the need to wear many hats.
  • The person is comfortable with the fact that the probability of success is a lot lower in the smaller company.

It may be an overlysimplistic opinion about private equity...

When you give, it comes back - or so the saying goes. I had one of those magical moments when an Ivey MBA student contacted me in regards to the book I wrote to make the Private Equity industry understandable to the layman. Yan Truong took the time to let me know what he got from Money Magnet and I was dazzled:
I have read your book, Money Magnet, and have to say that it was a great read. The book really opened my eyes to another side of PE that I never really understood. I always thought that PE was simply another form of financing for specific start-up companies with the occasional leveraged buyout of non "start-up" firms. However, after reading this book, I realize that financing is really just the tip of the iceberg. I now see PE more as a means to infuse life into a company at every crossroad, whether it is through financing, management expertise or simply giving the firm a new direction or vision. It may be an overlysimplistic opinion, but I see PE as capital markets meets management consulting with a touch of entrepreneurial vigor.
 Yan Truong, B.Eng.
MBA Candidate 2011
Richard Ivey School of Business 

Seems that the EMD has a great deal of value


What is the use of the registration Exempt Market Dealer EMD? After a lengthy discussion, I learnt that there is a long list of reasons the EMD brings value to both business owners and investors, such as reporting in to a regulatory body bringing protection to business owners. Then there are a slew of the hidden benefits for the Canadian economy.

In Halifax, the EMDA held a meeting at Cox and Palmer's beautiful law offices, situated right on the shoreline where military ships sat in the harbor and massive cargo ships slowly pulled into sight, arriving from distant lands. Patrick Fitzgerald, the expert in financially oriented law, was gracious enough to show me around the offices and to view their fine art collection. 
The EMDA event was well worth the trip to Halifax.  It reminded me how fortunate we are to live in this peaceful, safe and secure land. It seems fitting that our business opportunities and transactions offer the same protections to our business stakeholders. 
Canada is attractive as a place to do business because of its high ethics and legal protection. We are moving up in the globe because of registrations such as the EMD.
 The Securities Commission people also presented an interesting presentation, posing questions for the industry. It turned into a fantastically useful debate - still  being resolved over the next few years, mind you. 
I was particularly taken with the thoughtfulness and respect for business owners by the regulators - not the image one often gets from the media. Thank you for that, Nova Scotia!

3 Websites to Ruin Your Day

With American companies and consumers as Canada's prime market base, here are three websites to ruin your day completely: 
Now go and do something you enjoy - you deserve it!