Private Equity Myth #2: Valuations are the only consideration

Valuation is certainly an important consideration since you want to get a fair price when you sell your company. However, it's equally important to partner with an investor who shares your goals and who will work with you to achieve them.
When you focus exclusively on valuation, you risk ending up with a partner who doesn't understand your company, your growth strategies, or your industry.
Let's say, for example, that you sell your company to an investor whose expectations for your business are unrealistically high. You may obtain a good price for your company, but that relationship is likely to sour as the business fails to meet the investor's expectations. On the other hand, an investor with a more nuanced understanding of your company would work with you to increase its value in a realistic and sustainable way.

Jacoline Loewen, author of Money Magnet, shares her insights on attracting investors. Ms. Loewen works in Toronto, Ontario.
Jacoline B. Loewen is a managing director at Loewen & Partners, a private equity and venture capital firm based in Toronto, Ontario. Loewen & Partners works with the owners of growing, privately held companies to access capital. Jacoline can be reached at 416 961 0862 or Jacoline at loewenpartners.com.

Myth #1: Private equity is a win-lose game

First myth to check out is that the investors win, entrepreneurs lose.
According to this myth, private investors somehow make off with the value of your company -- perhaps buying at a too-low price and cutting you out of the eventual rewards that you'd earn from going public or selling to another company. Remember, though, that private equity investors only make money if the value of your company appreciates -- and, in most cases, the entrepreneur retains a substantial interest in the business. After all, it's in their best interest to help you grow your company and increase its value. Almost by definition, if the investor wins, the entrepreneur wins.
Moreover, a private equity investment provides entrepreneurs with the opportunity to diversify their assets. You receive cash for part of your share in the company, which you can spend or invest as you see fit. As a result, you immediately reduce your exposure to events at a single company, in a single industry -- and can access cash that you may need for retirement, college tuition, or major purchases.
Jacoline B. Loewen is a managing director at Loewen & Partners, a private equity and venture capital firm based in Toronto, Ontario. Loewen & Partners works with the owners of growing, privately held companies to access capital. Jacoline can be reached at 416 961 0862 or Jacoline at loewenpartners.com.

J Loewen is the author of Money Magnet: Attract Investors to Your Business and is a partner with Loewen & Partners, working with business owners to raise capital and restructure finances.

The Five Myths of Private Equity

Misperceptions about private equity can prevent an entrepreneur from making a rational decision about taking on outside investors. There are five common misperceptions and I am going to spend the next week discussing why entrepreneurs should be wary of them.
As venture capital and private equity continue to make news headlines, entrepreneurs may find it challenging to distinguish fact from fiction.
- Do investors win at the expense of entrepreneurs? Are investors out to wrest control from management?
- Is an investor's sole focus on the final liquidity event?
Without question, misperceptions can prevent an entrepreneur from making rational, fact-based decisions. During my 20 years working with business owners, I have come to identify what I call "The Five Myths of Private Equity."

Jacoline Loewen is the author of Money Magnet: How to Attract Investors to Your Business and her book can be found at http://www.moneymagnetbook.ca

Myths of Private Equity

Focus on what's important, put the myths to rest
Whether to take on private equity is a complex decision, requiring in-depth analysis of your personal and business goals, the market environment, and the financing options available. Focusing on these important considerations -- rather than on common misperceptions -- will help you make the right decision. It's time to put the myths to rest.
Jacoline B. Loewen is a managing director at Loewen & Partners, a private equity and venture capital firm based in Toronto, Ontario. Loewen & Partners works with the owners of growing, privately held companies to access capital. Jacoline can be reached at 416 961 0862 or Jacoline at loewenpartners.com.

BMO hires leveraged lender

Andy Willis has a great blog in The Globe & Mail. Here he is talking about how the wagons are beginning to circle:
BMO Capital Markets is getting ready for the return of private equity funds by hiring an experienced leveraged finance expert in its New York office.
Eric Luftig, a veteran of GE Capital Markers and CIBC World Markets, joined the U.S. investment banking arm of Bank of Montreal as a managing director. The Manhattan-based executive is now responsible for debt and equity private placements in BMO's leveraged finance group.
Bank of Montreal is one of several former mid-tier players in U.S. private equity to upgrade its talent at a time when most Wall Street firms are cutting head count. The credit crunch has trimmed the ranks of lenders to private equity funds, while improving the terms on which loans get made. That makes this sector far more attractive to Bank of Montreal and domestic rivals such as Royal Bank of Canada, which has also added expertise in this area.
“Eric's experience in private placements, including 20 years of solid deals, complements our team's overall mandate as we look to broaden our lead role participation in the leveraged financing arena,” said Jim Moglia, New York-based executive managing director and co-head of the BMO Capital Markets' leveraged finance group. This team deals in both leveraged loans and high yield bond financings.