And how is the Canadian economy doing?

"When we see government stimulus end and the private sector to walk on its own two legs, I will feel a lot more confident," says David Rosenberg, Chief Economist & Strategist, Gluskin Sheff + Associates Inc.

David spoke at YPO Leadership conference and gave the strong message that he is looking for sustainability. For investors, the market is being driven by government stimulus. This is the reason he is a bear on the US equity market. Canada is different as it is financial and commodities only, so much less of a diverse market. Resources have driven up the value of the Canadian dollar.

Look for multinationals who can benefit from the weaker Canadian dollar - those with Chinese and Indian businesses.

Posted by Jacoline Loewen, author of Money Magnet. See Financial Post video interview.

What do you think of upfront fees?

The Private equity and Venture Capital Group has been running the longest discussion on Linkedin on the hot topic of paying up front fees for capital raises.
Here is one comment that caught my eye"

I've worked with the CEO's and BOD's of many companies in their efforts to raise series A, B, or C capital. The issue of upfront fees normally arises when efforts to raise angel or VC funds have been exhausted and companies reach out to the alternative capital markets. As we all know during the last 18 months the traditional sources of capital have become scarce.In the alternative capital markets, it is common practice for the investment finders to charge upfront fees and generally these are large sums before beginning any work.

That being said, I have recently, through close long-term contacts in the VC industry, been introduced to an investment capital finder who does a great job raising capital and unlike investment capital companies like Bain, Goldman and others who charge large upfront fees. Loewen & Partners does not. 

Rather they  take a strategic partnership approach with company CEO's who have a business model they think can be executed successfully by charging a modest monthly cost share during the capital raise period. They don't want to make money on the front end but rather taking a strategic partnership approach with their clients, money is made on the back end of the deal when the capital closes escrow.

Loewen & Partners' business model makes complete sense to me as a outsider and business person. They have some skin in the game utilizing staff to zero in on sources of capital that would be a good match with the entrepreneur's business model. And with the cost share model , the entrepreneur has skin in the game preventing him/her from window shopping for money and then just walking away when the capital sources are brought to the table to negotiate the terms sheet. 

In my opinion, If you can find a similar capital finder who will do a cost share approach during the raising period, rather than charge large up front fees, you will have a win/win approach in raising your capital needs.

Peter's Question

“If the company disappeared, would it be missed?”

This question was posed by the thoughtful Peter Barlas, a portfolio manager at KJ Harrison, a company that invests high net worth individuals’ money. Peter was taking us through his logic in picking companies for this next stretch of market which is going to have "S" curves with oil slicks galore. 

If you want to know his stock picks, which I thought to be shrewd, you can get hold of him at KJ Harrison.

Now, what about you, what companies would you miss? Philip Lieberman, KJ Harrison, told me he would miss Gillette, but not Crate & Barrel, which is why retailers are falling from favour currently. For me, Apple would be a big black hole; their podcast feature alone has changed the way I get information.

If you are considering attracting money to your business, Peter’s question is a good one to ask each and every day. Would your company be missed? If not, why not? What would be the much requested features? That could add to your valuation.

What happens to companies with private equity?

Financial Post's John Turley-Ewart discusses private equity with author and entrepreneur Jacoline Loewen.

Watch the video
http://www.youtube.com/watch?v=nnfT3110upo&feature=related

Family businesses can grow to become major forces in their economies.

It is tough to keep a family business in the hands of the family, yet there are options. Private equity likes family businesses as other companies prefer doing work with them and customers like the feel of a family brand over a corporate one.
Very few large family businesses thrive beyond the third generation. Those that do, find ways to run themselves professionally while making the family happy. Private equity can play a huge role in keeping family legacy but the business moving forward profitably.

McKinsey and Co did research on how family businesses have managed to evolve and survive in various countries.

In advanced economies, as well as in emerging markets, most companies start out as family-owned businesses. From their humble beginnings, driven by entrepreneurial vision and energy, some have grown to become major forces in their economies. Indeed, this still happens not only in emerging markets, with their chaebols in South Korea and grupos in Latin America, but also in North America and Europe, where relatively young family-owned businesses such as Wal-Mart Stores, Bertelsmann, and Bombardier, to name just a few, have become front-runners.

But family-owned businesses—companies in which a family has a controlling stake—face a sobering reality: the statistical odds on their long-term success are bleak. In fact, a number of studies, taken together, suggest that only 5 percent continue to create shareholder value beyond the third generation. This statistic should come as no surprise, given the business challenges any company faces in increasingly competitive markets, to say nothing of the difficulty of keeping growing numbers of family shareholders committed to continued ownership. One kind of risk for these businesses comes from the generations that follow the founder, whose drive and business acumen they might not match, though they may insist on managing the company.

Jacoline Loewen, partner, author of Money Magnet, How to attract investors to your business.

Top 50 CEOs list has only 15 out of 50 MBAs - what gives?

The MBA does bring a great deal of value in taking you to the next level in thinking and giving you a instant network of equally competitive and performance driven people. It is always worthwhile revisiting the objective of obtaining an MBA. Is it to get you on the top 50, highest performing CEO list or to give you an introduction to management? 
Roger Martin, Dean of Rotman, is one of the leading edge leaders of business schools, I believe, and we are lucky to have him here in Canada. In the USA, here are thoughts on the MBA by one of my favorite out of the box investment advisors - Check out Clemens Kownatski' blog for more:

MBA Reality Check: "Harvard Business Review just published: The Best-Performing CEOs in the World

Very interesting to see who is on that list and even more interesting to learn what their backgrounds are.  As a Business School graduate, I often wonder about the merits of an MBA degree, considering the time, effort and substantial capital that went into the education.  Going through the list of  Top50 CEOs, I noticed that only 15 out of 50 (less than a third) had a formal business education.  Although I still consider business school one of the best investments I ever made, one has to wonder what these Non-MBAs know that isn’t taught in business school and whether or not that skill can be taught at all? Next time you consider an investment, you may wonder what makes people like Steve Jobs such an “out of the box” thinker; perhaps the same thought process could be used when analyzing your next investment."

You can read more by Clemens Kownastski's latest issue of Market Insights, also available at: http://fxinvestmentstrategies.blogspot.com/

As always, please email any questions to Clemens at: info@fxistrategies.com.

Financial Post interview with Jacoline Loewen: http://bit.ly/8bDKmJ

The new way of investors partnering with owners

Our research with the owners and CEOs of private companies and their private equity partners illustrates that there are three leverage points for investors to impact the trajectory of the business: 

1. Strategy and strategic contacts, 
2. People, and 
3. Execution. 

Loewen & Partners provides investors with a window of meaningful involvement in a portfolio company that goes far beyond the typical boardroom interaction. It allows a private equity partner to rapidly come up to speed on the key issues within the firm and help leverage the potential of the firm.

Click on who we are to get some background on our partners. To explore the RED™ process in detail, go to what we do.

Family-owned companies run by eldest sons tend to be managed relatively poorly.

"I do not want to hand him the business yet, as he is only 28 years old. Yet, I do need to retire and get my money out of the business. I'm only 47 years old," said this owner of a large business at a YPO dinner in Yorkville last night.
She shrugged, "Too bad that he cannot have the company but I am not ready to hand it over."
This is how the Queen must feel with Prince Charles wanting to take over the throne; he is simply not ready or competent enough. As I chatted with this entrepreneur and mother about her succession plans, she expressed her frustration. Despite having her eldest son running her business, I sensed she, like the Queen, did not respect his ability to take the ball and run with it.
"Succession planning is my biggest issue. All my money is tied up in that one business. Can you imagine that?" she worried.
Yes, I could.
I see it all the time. Owners do not know their options available. Meanwhile, they jeopardize their entire family wealth. McKinsey and Co have researched the results of handing family businesses to elder sons and the results should make this mum stop, "gulp" and take another look at using private equity.

Family-owned companies run by outsiders appear to be better managed than other companies, a study finds, while family-owned companies run by eldest sons tend to be managed relatively poorly. Moreover, the prevalence of family-owned companies run by eldest sons in France and the United Kingdom appears to account for a sizable portion of the gap in the effectiveness of management—and perhaps in performance—that we observe in their companies relative to those of Germany and the United States.

These findings come from a study of more than 700 midsize manufacturers in France, Germany, the United Kingdom, and the United States. The study, conducted by McKinsey and researchers at the London School of Economics,¹ looked at the quality of key management practices relative to performance metrics (such as total factor productivity, market share, sales growth, and market valuation) and found that they are strongly correlated.² On a scale of one to five, with five being the highest, US and German manufacturers scored best on these metrics (3.37 and 3.32, respectively), while French and UK companies scored worst (3.17 and 3.09).³

Which are better - public or private boards?

Advocates of the private-equity model have long argued that the better PE firms perform better than public companies do. This advantage, these advocates say, stems not only from financial engineering but also from stronger operational performance.
Directors who have served on the boards of both public and private companies agree—and add that the behavior of the board is one key element in driving superior operational performance. Among the 20 chairmen or CEOs, McKinsey & Co. recently interviewed as part of a study in the United Kingdom,1 most said that
PE boards were significantly more effective than were those of their public counterparts. The results are not comprehensive, nor do they fully reflect the wide diversity of public- and private-company boards. Nevertheless, our findings raise some important issues for public boards and their chairmen.
When asked to compare the overall effectiveness of PE and public boards, 15 of the 20 respondents said that PE boards clearly added more value; none said that their public counterparts were better. This sentiment was reflected in the scores the respondents gave each type of board, on a five-point scale (where 1 was poor and 5 was world class): PE boards averaged 4.6, public boards 3.5.

5 Tips to attract more revenues to your business

Wanting to attract more money to your business? Add on consulting.

Developing a consulting suite of skills has many side benefits, one of these is getting to know your client better. At the private equity firm, Loewen & Partners, the economic downturn - OK, cliff dive - meant they had to look for revenues elsewhere. Loewen & Partners had the blueprint on how to raise money for businesses but more than that--they knew the strategy required to achieve growth once businesses got their big payment. This was a scarce skill set, particularly with Canadian companies lulled into complacency by being next to the world's best market--America.

Since expanding into consulting services, Loewen & Partners has been impressed with how their client relationships have deepened and they have been able to push the growth strategies developed at the time of the capital raise. The best part is that the firm no longer has to be a transaction driven corporate finance expert. They get to stick around and be the high integrity, results-driven relationship that they always wanted.

Here are some of Loewen & Partners’ tips:

1. Design daring documents. You're charging consulting clients a pretty penny for access to your blueprint for success. That blueprint better be detailed, adaptable and actionable.
2. Speak to your current relationships. To uncover consulting prospects, make it a habit to ask clients to stick their necks out for you and make some introductions. When beginning, consider charging clients below-market rates in exchange for referrals.
3. Exploit internet connections. Social networking, blogging, Linkedin Groups are valuable, low-cost vehicles for spreading the word about your consulting service.
4. Tune in to opportunities. Train yourself and your sales force to listen to clients and prospects to spot opportunities to bring up your consulting services when a situation warrants.
5. Boomerang back frequently. Don't leave implementation of your recommendations to a client to chance. A positive outcome is critical, especially for a fledgling consultancy in need of glowing references, so stay in touch with clients to be sure they are continuing to execute the plan you put in place.