Build a more diverse client list, add value to your company's sale price

A business owner’s greatest worry when trying to sell the company is the prospect of receiving an inadequate price by the acquirer or being undervalued.

One of the drags on the value of a business is customer concentration. For owners planning to sell in the next five to 10 years, exporting is one way to diversify a customer base. “It’s too risky to export,” entrepreneurs often say when they’re asked about taking their brands beyond the Canadian market. “It would be a financial drain and a time suck.”

Read more at the Globe and Mail, Small Business.

How exporting can boost the value of your business

By building a more diverse client list you can eliminate the drag that is customer concentration

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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.”