Wealth Management

Voted #6 on Top 100 Family Business influencer on Wealth, Legacy, Finance and Investments: Jacoline Loewen My Amazon Authors' page Twitter:@ jacolineloewen Linkedin: Jacoline Loewen Profile

May 20, 2009

The public markets are calming down


The huge mood swings in the market are slowing as this chart shows - volatility is lessening.
I was chatting with a financial investment team and they had an interesting view. They are in their fifties and commented that the 24 hour talk shows obsessing over the market are disrupting confidence. They added that Black Monday back in 1987 was disruptive too but because CNN, BNN and so on were not around (just Nolton Nash on the CBC), everyone got back to business, trying to make sure their investment practices were sound.

Jacoline Loewen is a contributer to Trusted Advisors' Survivial Kit and a partner with Loewen & Partners.

What every business owner should know

It truly makes me grateful to live in Canada when I read Shakedown by Ezra Levant which exposes how far the pendulum has swung in the so called name of human rights. The government’s Human Rights Commission ruled that a restaurant employee had her human rights abused because her feelings were hurt by the kitchen staff’s music (she put in her complaint four years later). The Human Rights Commission also ruled against the owner of a hairdressing salon because of the horrendous human rights abuse suffered in that Dickenson workhouse where a male hairdresser was called “Loser” by the other staff. If these are human rights abuses, Canada is a mighty fine country. But organizations like Human Rights Watch who fight against violence in other countires, must be aghast at the hijacking of the words “human rights” by the HRC who, as Ezra Levant points out in his book, are making a mockery of those very words.
Ezra opens by describing his own situation as the owner of a business accused of human rights abuse but, to his credit, quickly puts that aside and tackles a full blown investigation of the HRC cases – a human rights audit if you like. Even if he has cherry-picked the vexatious cases, there are too many, and I was particularly disturbed by the cash payment rulings against small business owners. Ask any tax accountant, most small business owners do not have a great deal of cash and often go without a monthly salary or contribution to a pension just to keep going – unlike HRC agents with their salary (many over $100,000), indexed pensions and benefits.
Using his education in law, Ezra unpacks case after case illustrating the imbalance between the person making the human right’s complaint and the business owner. The complainant gets a lawyer (funded by tax payers), does not need to face the business owner they are accusing, may get a cash payment ($50,000 has been paid), may get a written apology even published in the paper.
Now, when was the last time you saw an embezzler’s letter of apology to a business owner in the newspaper?
If the complainant’s case is dismissed, they are not required to cover the costs to the business owner as a real court case dismissal would require. It gets worse: the HRC can enter your work and home, seize any property they want without a warrant – good Lord, is this Zimbabwe?
For all of us non-lawyers, Ezra illustrates how hundreds of years of legal framework and code of conduct gets swept aside by these HRC agents pursuing frivoulous complaints. Is there not enough salt in the soup at your company’s canteen? Gee, file a human rights complaint to your local HRC and you could end up with some cash.
I wondered if the HRC had industrial relations or business expertise. Ezra fills us in. The head of the BC HRC’s education is nursing. Well, that explains it. She’s got Head Matron Syndrome: she thinks she’s thundering down sterilized, scrubbed halls of a hospital, patients tucked meekly between starched sheets, nurses and orderlies all bowing their heads obediently in fear. That head nurse has real power – that’s for sure.
The deadliest part of Ezra Levant’s book is his description of his own interrogation. The HRC government agent does not have the slightest clue about the damage she is inflicting on a business owner or on the future well-being of our society. She does not realize how these claims will tarnish the very good work done by so many government employees.
As Mark Steyn explains in the foreword, “Go to YouTube and look at the videos of Ezra Levant’s interrogation, you will not find some jackbooted thug prowling a torture chamber but a dull bureaucrat asking soft spoken questions in a boring office. Nevertheless, she is engaged in a totalitarian act.”
Of course, I would not want to call that HRC agent a “Loser” for fear of hurting her feelings. Then she could complain her human rights were abused and I will be dragged through five years of court proceedings, fined and forced to write a letter of apology printed on the pages here in The Women’s Post.
As these crazy Human Rights case rulings become public with the help of Ezra, the repercussions for our business community will be chilling. These human rights cases make entrepreneurs feel angry and downtrodden. Why take the risk, stress and responsibility to run a restaurant or hairdressing salon when you can get slapped with a human rights case that can cost you your business? Heck, let’s all become government employees because as Ezra Levant makes very clear in his book, Shakedown, just like Rodney Dangerfield, business owners don’t get no respect.

May 19, 2009

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.

May 18, 2009

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>.

May 15, 2009

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.


May 13, 2009

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.

May 12, 2009

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

May 11, 2009

May 5, 2009

5 Questions Board Directors Can Learn From Private Equity

If Private Equity gets involved with a company, as either a minority partner or over 50% ownership, there are usually five major thrusts of reform.
These translate into five key questions that directors should pose to senior management and expect a thoughtful analysis in response. If you are a Board Member, take note and try asking them at your next Board meeting:
1. Have we left too much cash on our balance sheet instead of raising our cash dividends or buying back our own shares?
2. Do we have the optimal capital structure with the lowest weighted after-tax cost of total capital, including debt and equity?
3. Do we have an operating plan that will significantly increase shareholder value, with specific metrics to monitor performance?
4. Are the compensation rewards for our top executives tied closely enough to increases in shareholder value, with real penalties for nonperformance?
5. Have our board members dedicated enough time and do they have sufficient industry expertise and financial incentive to maximize shareholder value?

Jacoline Loewen is a partner with Loewen & Partners and has been a Board Member for Bilingo China, Innovation Exchange, The Women's Post, Strategic Leadership Forum and more.

May 4, 2009

US Debt May Crowd Out Private Investment

Deficits are a way for governments to use tax payer money and public spending to stimulate the economy when private demand is weak. This works as long as a country closes its deficit and pays back its borrowings after its economy starts to recover.
The trouble is that government borrowing risks crowding out private investment, driving up interest rates and potentially slowing a recovery still trying to take hold. That is why the American Federal Reserve announced an extraordinary policy this year to buy back existing long-term debt — $300 billion over six months — to drive down yields. The strategy worked for a while, but now the impact of that decision appears to be wearing off as long-term interest rates tick up again.
Then there is the concern that the interest the government must pay on its debt obligations may hurt future generations. The Congressional Budget Office expects interest payments to more than quadruple in the next decade as Washington borrows and spends, to $806 billion by 2019 from $172 billion next year.
GRAHAM BOWLEY and JACK HEALY report in the Wall Street Journal, May 3, 2009: “You’re just paying more and more interest and having to borrow more and more money to pay the interest,” said Charles S. Konigsberg, chief budget counsel for the Concord Coalition, which advocates lower deficits. “It diverts a tremendous amount of resources, of taxpayer dollars.”
Of course, no one is suggesting the United States will have problems paying the interest on its debt. On Wednesday, even as it announced its huge financing needs for the latest quarter, the Treasury said financial markets could accommodate the flood of new bonds. “We feel confident that we can address these large borrowing needs,” said Karthik Ramanathan, the Treasury’s acting assistant secretary for financial markets.
One worry, however, is that there are fewer eager lenders to buy all that American debt. Most of the world is in recession, and other nations have rising borrowing needs as well. As other nations’ surpluses turn to deficits, America will face competition in global financial markets for its borrowing needs. For the moment, the United States is actually benefiting from a flight to quality into Treasuries brought on by the global financial crisis, which helped reduce rates to record lows this winter. But the influx will not continue forever.
China has lent immense sums to the United States — about two-thirds of its central bank’s $1.95 trillion in foreign reserves is believed to be in United States securities — but it has begun to voice concerns about America’s financial health.
To calm nerves and fill the deficit hole, the government is getting creative. The Treasury is ramping up its auction calendar, holding more frequent sales of government debt and selling the debt in expanded amounts. It is now holding sales of its 30-year bond each month, up from four times annually.It is also resuscitating previously discontinued bonds, such as the seven-year note and the three-year note, to try to mop up any available money all along the yield curve. There is even talk of issuing billions of dollars of a new 50-year bond, though the idea has not won official approval