Anyone want to buy a business?

The Globe and Mail, WALLACE IMMEN, had a good article on Succession:

Marketability is a particular issue for companies with enterprise values below $30-million, according to business broker Mike Haines, managing partner of M & A Network in Oakville, Ont.. “Retail is the most hard hit and hardest to sell, along with restaurants. No one really wants to get into labour intensive properties that have minimal returns and face risks due to rising transportation costs.”

You have to reconfigure the business so it runs smoothly without you, he advised. “One of the best measures of a good business is if the owner can go away for three months and the business can still continue to operate smoothly and the customers don’t miss the owner. That’s what a buyer wants to see.”

A strategy that can pay significant dividends is to bring in an investor to give the business a boost, suggested Jacoline Loewen, director of Crosbie., in Toronto. “The advice we give is five to 10 years before you want to sell, bring in strategic investors or private equity, that will buy a portion of the business,” typically about 30 per cent, she said.

“It’s a really good discipline for owners, because many entrepreneurs are used to having everyone agreeing with them because they have all the power. Sole owners also find it hard to believe that someone else would take the business and grow it far beyond what they’re doing currently. An equity owner will ask questions and look for efficiencies and ways to grow the business, Ms. Loewen explained.

“It may be the first time an owner is challenged to quantify their success and go through a comprehensive strategy process, she said. You’d be amazed how few small-business owners have figured out their key performance indicators and what drives the success of the business.”

Jacoline Loewen, 416 362 1709

Canada’s Commercialization Crisis and Shortage of Venture Capital: Will the Federal Government’s Solution Work?

Good article on the Government's program for the Venture Capital crisis in Canada.Click here to read. It is by Stephen Horowitz, American law firm, Choate lawyers.

Addressing Canada’s Commercialization Crisis and Shortage of Venture Capital:  

Will the Federal Government’s Solution Work?  --  that was just published in the Technology Innovation Management Review (Carleton University).   It analyzes the federal government’s $400 million VC Plan and the impact of its contemporaneously-announced phase out of labour-sponsored fund tax credits. Click here to read.

Why Owners Do Not Sell When They Should - Michael Lay, OnCap

In the Globe and Mail, interesting article with a highly relevant comment from Michael Lay, managing partner at Onex's mid-market private equity business, Oncap.

It's a tough time to acquire. Many private businesses the group has pursued have owners who believe strength is returning to the equity markets and are reluctant to sell. "Or, a number of them have said 'I'm comfortable with my business, I know it, if you guys write me a cheque I don't know what I'd do with it,'" he said.”

What do you think?

90 cross-border deals – or almost 40% of M&A deals - Finance Post

Canadians are buying foreign companies. In fact, in this last quarter, Canadian firms did 90 cross-border deals – or almost 40% of all M and A deals.

Barry Critchley, doyen of the finance industry, has the details on his interesting blog over at the Financial Post. Worth the read:

According to Crosbie & Co. Inc. 224 transactions representing $44.7-billion in total value were announced in the second quarter — or 9.4% more activity and 52% more value than in the first quarter.
“While the increase in announcements was not overwhelming, it represents a break from a declining multi-quarter trend and a return to a more normal range of quarterly activity,” said Colin W. Walker, the managing director at Crosbie & Co.: “Business conditions continue to remain relatively favourable for M&A in most industry sectors and could support much higher levels of activity.”

Brian Koscak, EMDA - Selling To Accredited Investors – You Better Get It Right!

Private Capital markets are seen to be exciting but also fraught with danger. Industry players know that they need to keep the industry as transparent as possible and as safe as possible for investors. The grandmother with her retirement nest egg needs to be ensured that her savings are not getting stolen. Just as the food industry gets government regulation to keep everyone on a straight track, so does the private capital market. The industry has created an association - the EMDA. The Chair is the dynamic, and irrepressible, Brian Koscak, partner at Cassels Brock. Here is Brian's view on accredited investors:

How many times have you seen this situation? You have an attractive investment opportunity that you would like to bring to the attention of a potential investor but they are reluctant to provide you with the details of their full financial picture. You believe they are an accredited investor (AI) but you are not sure. You need to get this right since you can only do the private placement in reliance on the accredited investor exemption (the AI exemption) set out in section 2.3 of National Instrument 45-106 – Prospectus and Registration Exemptions (NI 45-106). What do you do? Does it matter if you get it wrong?

Canadian securities regulators are increasingly concerned that issuers and exempt market dealers (EMDs) are getting it wrong and selling exempt securities to non-AIs – the public. Continue reading at the EMDA website.

 By: Brian Koscak, EMDA Chairman and Partner, Cassels Brock & Blackwell LLP
Afzal Hasan, Associate, Cassels Brock & Blackwell LLP