Why private equity is taking money from public markets

The mighty company of GM is now worth a $1 per share, a level not seen since the 1930s. What is odd is that of the 22 insiders listed (see Yahoo Finance) a full 10 of these "officers" and "directors" have zero shares in the company. Mr. Wagoner, the previous CEO was holding a mere 35,290 shares currently valued at about $38,500. All insiders together own a total of only about $145,000 worth of shares in the company. And this is not a recent development. The more pronounced insider sales occurred in 2007/2008 and this raises lots of questions particularly with regard to the requests for bailout money.
These company executives apparently did not have much faith in their own firm and yet, they expected the US taxpayer to effectively own them - hmm...
So where are bailouts going? I hope the American people can demand answers.
If a private equity fund was asked to invest in such a company and they didn't see the same commitment from the senior executives, why should they put in money? The US taxpayers should ask the very same question or rather, the US government, on behalf of the US taxpayers.
Yet another example of the difference between private equity fund boards and public market boards. When you are putting in your own money, you want clear answers and results.

What is Private Equity?

One way to describe private equity is, simply put, privately-held money invested into privately-owned companies that are not listed on the stock market.
Investments could be your Uncle Jim’s $1M he put into your brother’s video gaming company. This is private, it is not listed on the public market where the shares can be bought and sold by anyone. This definition, however, omits the key difference that sets private equity far apart from alternate capital.
One of the leading private equity players, David Rubenstein of The Carlyle Group, gets to the nub. “Private equity is the effort made by individuals with a stake in a business.”[i] These individuals will put capital in, try to improve the business, make it grow, and, ultimately, sell their stake.

Jacoline Loewen is a partner with Loewen & Partners which has raised over $100M for owners of companies.
[i] Rubenstein’s definition sourced from the website www.bigthink.com/business-economics/6380>.

Private Equity can be alarming

Private Equity is such a tough type of financing to help owners of companies understand. The big deals done get the media attention. Some of the stories told are alarming for owners.
It is only in the last decade that this type of money has now become available in all sorts of formats for business owners of mid-sized companies. These stories do tend to fly under the media radar.
This is why Loewen & Partners runs CEO Round tables with Ivey Business School to showcase private equity. Yesterday, we had McKinsey and Company and Bill Wignall giving detailed presentations to a room of business owners. Here is the take away from Paul Hogendoorn, owner of OES.

"It’s both a professional benefit and a pleasure to attend your CEO events. Yesterday was no different. (BTW, my most recent column again referenced a key take-away from a previous event).
My big take-aways from this last one were:
- It’s OK not to need PE money
- Know specifically what you want to use any investor PE money for
- The structure of a deal can make even an otherwise unattractive deal workable
Ken enjoyed it to. Much of the first presentation was greek to him (and therefore intimidating – which was consistent with my first experienced a couple years ago), but he recognized the value in gaining some exposure to it, and he really enjoyed the second speaker."



The second speaker was a professional manager, Bill Wignall, who gave his experience in accessing Angel, Venture Capital and Private Equity Fund money. It was a great day and it is always gratifying to see that you are helping business owners.

Companies with Debt Are Attractive to Private Equity

There are millions of private equity dollars out there looking for good businesses and smart owners. Even if you think your operation is not up to snuff—perhaps it’s not large enough, making too little profit, or employing too few people—you may be surprised how highly others value it.
I can say this because in my experience, I have often been astonished at which businesses are liked and coveted by investors—yes, even those that are not currently profitable.
McGregor Socks, a long serving Canadian company is such a case. After struggling to adapt to the fast changing global market, McGregor knew it needed to add China as a destination for knitting up Canadian-designed creations. It was a private equity fund that put up the money since they already had experience in China. Bringing in partners is a difficult transition but with supportive investors, an excellent Canadian brand continues to fill store shelves (look for a pair of McGregor’s the next time you need socks).
Jacoline Loewen is a contributing author to Peter Merrick's book, The Trusted Advisor's Survival Handbook.

6 Reasons to Read Money Magnet: Attracting Investors to Your Business

I just finished reading Money Magnet. Thank you for writing/recommending it! The information you shared will save me a lot of time instead of reinventing the wheel. I like reading materials from people like you who can share specific industry insight (eg. when you described what VC Rick wants to see in slides). Some of my key takeaways include but are not limited to the following:

1. Targeting qualified investors based on their mathematical fit and specifically asking them to clarify their full criteria


2. How to be investor ready/the legacy investor concept.


3. An investors’ protection/clauses (ensuring that I negotiate unnecessary ones).


4. Knowing common pitfalls/key criteria investors like


5. Ensuring that I answer the 4 investor-ready questions and


6. Investor-friendly methods of structuring a presentation