Top 2 Reasons a Family Business will survive

Family businesses are often thought of as ma and pop stores, but this is far from the facts. I remember my surprise at learning the true number of family businesses in Canada and America.
McKinsey has released the results of family business research and it is well worth a read. According to McKinsey, the two top reasons for family business being able to survive is first of all - bringing in professional management and, second, having family stay committed to the concept of family legacy. No surprise there but bringing in professional management is still such a difficult barrier to pass for too many family businesses.
Here is the McKinsey article summary:

Definition of family businesses: a family owns a significant share and can influence important decisions, particularly the election of the chairman and CEO.

As family businesses expand from their entrepreneurial beginnings, they face unique performance and governance challenges. The generations that follow the founder, for example, may insist on running the company even though they are not suited for the job. And as the number of family shareholders increases exponentially generation by generation, with few actually working in the business, the commitment to carry on as owners can’t be taken for granted. Indeed, less than 30 percent of family businesses survive into the third generation of family ownership. Those that do, however, tend to perform well over time compared with their corporate peers, according to recent McKinsey research. Their performance suggests that they have a story of interest not only to family businesses around the world, of various sizes and in various stages of development, but also to companies with other forms of ownership.

Read more.
Jacoline Loewen, author of Money Magnet, How to attract private equity to your business

Toronto Entrepreneurs will share their secrets

THE EVENT: Courage to Lead
What to Expect

Wouldn't you like to pick up the phone and ask Warren Buffet his secrets to running a business? The next best thing is getting inspired by some home grown entrepreneurs, not in Buffet's league by any means, but who are building businesses to last. Three amazing Toronto business entrepreneurs are speaking in Toronto tomorrow night downtown, and you can pick up a few ideas as well as share a glass of wine. 

• Brenda Bot, of Salad Creations Canada; 
• Jacoline Loewen, of Loewen and Partners, Private Equity; and 
• Susan Hodkinson, of Soberman LLP. 

Join these owners to discuss what it takes to run a business and what you can expect when you are your own boss. Womens Post is running Courage to Lead and its a great opportunity to meet the people behind the magazine. Tickets are only $10, and that includes wine and appetizers and a great take away tote.

Wed 24th, evening

Tickets: $10 and include wine and food and a takeaway. 

Location: McNally's Bookstore, Bay Street, Toronto, across from The Bay, between Richmond and Adelaide.

Youngest Billionaires and how they got so wealthy

Here are Forbes' top 10 youngest billionaires 

Billionnaires in North America generally are mostly self made and do not start out life as super wealthy. They strive to share with the world their creations. Below are my favourite super wealthy entrepreneurs. Let me know what you think.
Elizabeth Holmes left Stanford University at 19 with a plan to start her own company. For money, she cashed out the funds her parents had saved for tuition. Now, she counts billionaire Larry Ellison as an investor and has former secretaries of state on her board. I

think a lot of young people have incredible ideas and incredible insights, but sometimes they wait before they go give their life to something," she said. "What I did was just to start a little earlier." Holmes, through her company Theranos, has taken on the $76 billion laboratory-diagnostic industry as her target. It's an industry that was just waiting to be disrupted, since blood testing has not changed since the modern clinical lab emerged in the 1960s.
Here’s the rest of the Forbes Top 10 list:

2. Mark Zuckerberg (see picture above)
Net worth: £2.6 billion ($4 billion)
How: Internet
Age: 25
Citizenship: US
Marital status: Married

The Facebook-founder launched the social networking site from his Harvard bedroom in 2004. Facebook founder, Mark Zuckerman, is another dropout and a great example to small business owners to focus and work to get the business growth required to create great wealth. 

3. John Arnold
Net worth: £2.6 billion ($4 billion)
How: Energy trading
Age: 36
Citizenship: US
Marital status: Married
Hired by Enron and founded hedge fund Centaurus Energy in 2002 after Enron collapsed.

4. Yang Huiyan
Net worth: £2.2 billion ($3.4 billion)
How: Property
Age: 28
Citizenship: China
Marital status: Married
Her fortune is tied up in her holding in Guangdong developer Country Garden, run by her father Yeung Kwok Keung.

5. Albert von Thurn und Taxis
Net worth: £1.4 billion ($2.2 billion)
How: Inheritance
Age: 26
Citizenship: Germany
Marital status: Single
Inherited fortune on his 18th birthday and lives in family castle, Schloss Emmeram.

6. Fahd Hariri
Net worth: £900 million ($1.4 billion)
How: Construction, investments
Age: 29
Citizenship: Lebanon
Marital status: Single
Youngest son of assassinated Lebanese prime minister Rafiq Hariri inherited stake in his father's construction, telecom and property empire.

6.5 Aymin Hariri (Yup, another one)
Net worth: £900 million ($1.4 billion)
How: Construction, investments
Age: 31
Citizenship: Saudi Arabia
Marital status: Married
Brother of above, while other brother Saad is Prime Minister of Lebanon. Say no more...

7. Yoshikazu Tanaka
Net worth: £900 million ($1.4 billion)
How: Internet
Age: 33
Citizenship: Japan
Marital status: Na
Like Zuckerberg, Tanaka also made his fortune from a social networking site, Gree.
8. Kostyantin Zhevago
Net worth: £790 million ($1.2 billion)
How: Banking, mining
Age: 36
Citizenship: Ukraine
Marital status: Married
Has majority stake in iron ore producer Ferrexpo and Finance; Credit Bank.
9. Lee Ziaohui
Net worth: £658 million ($1 billion)
How: Manufacturing
Age: 28
Citizenship: China
Marital status: Na
Chairman of one of China's biggest private steel manufacturers Shanxi Haixin Iron & Steel Group, since father was shot in 2003.

10. Shahid Balwa
Net worth: £658 million ($1 billion)
How: Property
Age: 36
Citizenship: India
Marital status: Married
Partner in DB Realty whose projects include Turf Estate, a luxury high-rise, and the 108-storey Park Hyatt Hotel in Mumbai.

It is disconcerting to read about those who have inherited wealth due to fathers being gunned down (Lee Ziaohui, China) or assassinated (Fahd Hariri, Lebanon). As for the Lebanese brother billionaires, that's right, each one is a stand alone billionaire, is it not a bit suspicious that two Hariri brothers are billionaires while the third is Prime Minister of Lebanon. The brother who is Prime Minister took over after his Dad (who was the Prime Minister) after the assassination. America is a wonderful place which is structured to help young entrepreneurs get ahead. That is the kind of wealth to achieve.

To get the report Billionaires - Architect of Wealth and Legacy, please contact Jacoline.Loewen at ubs.com

Jacoline Loewen

Jacoline is the Director of Business Development with UBS (Canada), largest wealth manager in the world, voted Best Private Bank in 2014.

This article is for entertainment purposes only. Any financial advice must be from a registered financial advisor.

rcm.amazon.com with rcm-na.amazon-adsystem.com

"Delay and Pray" is new mantra of PE firms

Rather than addressing the underlying problem of too much debt, private equity firms’ refinancing of debt at their portfolio companies is simply extending the problems out to some point further in the future, say distressed investors.
“Many of these companies are able to service their debt,” said Jeffrey Aronson, managing principal at Centerbridge Partners. “They can pay the monthly Visa bill. The real question is, can they pay it back?”
Tennenbaum seemed to think the answer to that question is no, arguing that when these companies have taken on new debt, it has gone mostly to pay down existing bank debt - not to growth, or to somehow making a company’s model more defensible. And in many cases, companies have been replacing bank debt with high-yield bonds which, while maturing later, have a higher interest rate.
“More cash is going to get clawed up” to pay the interest rates on that debt, Tennenbaum said. He said the new debt is levied at an interest rate of around 10%, versus 4% on the old debt.
“I think this cycle is going to have a long tail,” Aronson said. “You haven’t really seen many of the buyouts hit the wall. At the DBR Restructuring and Turnaround Summit on Wednesday, they used a variety of colorful anecdotes for what PE firms are doing, ranging from the now common “extend and pretend” and “delay and pray” descriptions to some more creative phrases.

“The longer you kick the can down the road, the nastier the can gets,” said Michael Tennenbaum, senior managing partner of Tennenbaum Capital Partners.
“[They] kicked the can down the road, and everyone realizes that it’s the same old battered can,” said Angus Littlejohn, chairman and chief executive of Littlejohn & Co.
Read more at WSJ.

Canadian ABL lenders in the private equity indsutry are having the busiest time of their lives. Business owners still prefer to have the debt rather than give up equity and are using debt to pay off their short term debts and keep going business-as-usual rather.

Private equity motives for a business are helping at GM

“This was not a private equity investment,” Rattner, a co-founder of Quadrangle Group LLC, said at the DBR Restructuring and Turnaround Summit.That’s because the motives of the auto task force were wildly different than those of private equity investors. Instead of aiming to generate a profit, the goal was to lose as little taxpayer money as possible – and to avoid a meltdown in the Midwest.
Steven Rattner may have been hired by the government to turn around the U.S. auto industry in part for his private equity and Wall Street expertise. But the turnaround of General Motors Co. and Chrysler bore little resemblance to a typical PE investment.

“There was a systemic risk not unlike the systemic risk of Lehman Brothers,” Rattner said. The auto industry “could have brought the whole Midwest down with it.”
Given those goals, Rattner thus far is pleased with how the turnarounds have turned out. On GM, he said, the U.S. government’s investment is currently worth between $40 billion and $45 billion, versus the roughly $50 billion that it spent bailing out the company.
Still, Rattner’s private equity inclinations came out at times during the keynote address, especially when he discussed how poorly the company was run before the government intervened.
“This was one of the worst-managed companies I’ve ever seen in my life of any size,” Rattner said, adding that he’s happy with the management team that he helped to install. “I wake up every morning grateful that Ed Whitacre is there.”
Read more at WSJ.