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.

Compared to the heyday of 2007, companies need to offer more equity for capital

“We’ve slowly been picking up speed as far as deal flow goes,” says John Gabbert, chief executive of Seattle-based Pitchbook Data Inc., a private equity research and news company. "So far this year, 20 private equity funds have raised $15 billion nationally."
Speaking at the ACG conference held in Houston, private equity experts seemed more positive than six months ago.But lenders are still holding back on their end, the panel of private equity experts said.
“It’s still very difficult to get financing,” said Peter Rosenberg, managing director of the middle market group of investment banking and capital markets at Wells Fargo Securities LLC in San Francisco. “We have not seen many stable situations and we are finding out now that the lenders are being much more detailed in performing their own scrutiny and their own due diligence.”
Compared to the heyday of 2007, companies need to offer more equity to move forward.
“As we see it, the structures tend to be requiring about 40 percent or more equity to get the deals done,” said panelist Charles Riceman, managing director of Chicago-based Golub Capital. However, Riceman also said he expects to see a further increase in deal activity in the second half of 2010.
"Canadian business owners are recognizing these shifts as their top market, America, is not the economic powerhouse of five years ago. It is painful to make the adjustment and not believe that over the mountain, an economic recovery is coming," commented Jacoline Loewen, author of Money Magnet: Attracting Investors to Your Business. "A business is a life long work of art and to suddenly see the value fall drastically is hard to accept."

America overtaken on Forbes Billionaires' List

Scratch Bill Gates off the top of the list of richest people in the world. The new bizillionaire is Carlos Slim of Mexico who makes his money from...wait for it...finance and teleco. Read more...

China is now home to 64 billionaires – the most of any country outside the US – with 27 of them reaching the $1bn mark for the first time. Newcomers include Li Shufu, who runs Chinese car manufacturer Geely - which is on the verge of buying Volvo from Ford – and Fu Guangming who runs Fuijan Sunner Group which processes chicken for Kentucky Fried Chicken in China. Anyone catering to Chinese consumers is doing very well. The 14 self-made women on the 1,011-strong list have one interesting trend: Seven are in China.

Brazilian mining magnate Eike Batista saw a dramatic increase in his wealth over the year, up $19.5bn to $27bn, the biggest wealth gain of anyone on the list. Overall, the Forbes annual survey reflected a significant return in many billionaire’s fortunes, with the average net worth of those on the list rising from $3bn to $3.5bn, although that is perhaps not surprising as the cut-off date for the 2009 survey was February 13 2009, close to last year’s stock market lows. Aside from Messrs Slim and Gates, investment guru Warren Buffett took third place, with a fortune valued at $47bn, up $10bn from the prior year. Other notable constituents on the list include LVMH chief Bernard Arnualt, Europe’s richest man with a $27.5bn fortune. Ranked seventh, he has seen his fortune rise by $11bn in the last 12 months. Steel magnate Lakshmi Mittal saw his fortune increase $9.4bn to $28.7bn, pushing him up two spots to fifth place.

In terms of British billionaires, Sports Direct and Newcastle United owner Mike Ashley is now worth $1.5bn, while the Duke of Grosvenor and his family remain the wealthiest Britons, with a $12bn fortune, up $1bn in spite of the fall in the value of commercial property. One UK newcomer to the list is hedge fund manager Alan Howard – of Brevan Howard – with a net worth of $1.8bn, while David and Simon Reuben ($7.5bn), Sir Richard Branson ($4bn), and Joe Lewis ($3bn) all saw their fortunes increase in the last 12 months.

Read more.

Western world standards for business, such as paying a fair, living wage to employees and  paying taxes are increasingly driving good companies out of North America to offshore factories.

If you do not have a rich uncle, where else can you get seed money?

We do not all have rich uncles to hand out the seed money to coax a business through those early stages of growth. Yet, that loan or grant at the critical early stages of business can mean all the difference in survival, along with some mentorhip. So what is a young entrepreneur to do? We are very lucky in Canada to have the Canadian Youth Business Forum (CYBF) which delivers all the help of a rich uncle.

I have been involved with many business incubator type organizations and this is one of the best in the world. CYBF gives loans and grants to young entrepreneurs but they also assign a mentor, usually a seasoned executive, who can prod on the owners to do the right things and meet the right people. So much of business is about who you know and having that right mentor. CYBF has worked hard to get all the pieces in place to give fragile start ups that extra boost, and to get the wing beneath their wings. Their impressive list of companies who have gone onto Dragons' Den and won deals keeps growing and there are loads of quiter successes, as well as rapidly scaling companies.

It is thrilling to let you know that CYBF, representing Canada, received the top prize of 'Country of the Year Award' at the Global Entrepreneurship Congress in Dubai. As the official host of Global Entrepreneurship Week Canada (GEW) for 2009, CYBF was honoured to accept this award on behalf of all our partners. Thanks to all the volunteers and Board commitment, CYBF came first among 100 competing countries. To learn how CYBF promotes a culture of youth entrepreneurship within Canada and globally, please read their press release Please click on the following link to access it: http://dl.dropbox.com/u/2738308/Dubai_award_release.doc

A special hats off to Vivian Prokop, CEO of CYBF. Vivian knows the entrepreneurs well and is a role model for all of them. She has inspired and driven the growth of CYBF with her sparkle and energy.The federal government also recognized the credibility and success of CYBF by awrding a $20 million grant which CYBF then distributes to young entrepreneurs as the seed money to get them started.

To apply for CYBF, go here.

To become a mentor, go here.

Jacoline Loewen, author of Money Magnet and supporter of CYBF.

Business owners have protection from financial advisors - EMDA

If you are the owner of a company with revenues under $50 million, you may be vulnerable to financial experts charging unnecessary fees or not delivering on what they promise. How can you get recourse without expensive lawyer fees?
Now there is an answer.
Before you hire a financial advisor, do ask if they are registered with the Ontario Stock Exchange (OSC) as an exempt market dealer - EMD. Even a "one man shop" can register as an EMD, in order to demonstrate that they know how to treat the their clients correctly and follow a minimum set procedure and process. This regulation of small finance companies is to protect the business owners of Canada.
 See more about the EMDA - Exempt Market Dealers Association.
posted by Jacoline Loewen, expert in private equity for business owners, author of Money Magnet.

Yesterday's wealth is no guarantee of tomorrow's success

Search the phrase “sudden wealth syndrome” in Google and you'll find thousands of Web pages replete with tales of lottery winners, women who married wealthy men, and successful entrepreneurs who all have one thing in common: 

They can't handle their new riches.

It's almost become a truism that those who find themselves with a sudden windfall will blow it. In fact, the chance that a wealthy family will still be wealthy three generations down the line is less than one in 10. Experts who deal with such families say it's true that the chips are stacked against them.

“Yesterday's wealth is no guarantee of tomorrow's success,” said Sarah Bull, a principal and member of the KJH Private Services team at KJ Harrison & Partners Inc. in Toronto. “When people receive wealth for the first time they don't really know how to handle it. There are often emotional issues around handling it, and they don't know how to spend responsibly, and they don't understand the math.”

A growing body of evidence points to disturbingly low levels of financial literacy among Canadians, and one of the symptoms is the spending habits of the nouveau riche. A study released this month by research firm TNS found that only 13 per cent of Canadians could answer three basic risk-literacy questions correctly, and suggested that most consumers have very little grasp of the basic principles of financial risk.

It asked participants to assess the relative payout of two lotteries; the relative risk and returns from two investment funds; and the relative risk of investing in a single stock versus a basket of stocks. Sixteen per cent of Canadian men and 9 per cent of women answered all of the questions correctly. Those who had attended university fared better than those who hadn't, but both groups had dismal results.Read more 

Jacoline Loewen, finance expert, Author of Money Magnet: Attracting Investors to Your Business.

Private equity may like a GST tax

Another big 2010 surprise could be the U.S. dollar rebounding exceptionally strongly (even if temporarily) along with the economy.  In this event, the international contribution to multinational profits would slow, but any such shortfall would then be more than made good on the home front. Private equity would have to take this into consideration as they nurse their portfolio companies back to some semblance of health.

A further consequence of a rebounding U.S. dollar could be the price of gold and gold shares both taking a beating - what a non-consensus surprise that would be!

However, even given an exceptionally strong recovery, I still can’t see the U.S. outgrowing its intractable debt and deficit problems without something big having to give.  And, facing the hard fiscal choices that lie ahead, there could very likely be the temptation of expediently continuing stimulus and debt and deficit policies for that much longer.  Repaying ballooning sovereign debts in depreciating currencies would be another expedient way out.  These are why the risks of returning inflation must continue to loom large.

But what if these risks were to be headed off by a debt-hammered U.S. electorate being sold on a Canadian-style GST consumer tax? 

I’ll leave readers to calculate by how much a 5% tax on $10 trillion of annual consumption would reduce those gargantuan annual deficits.  It might not herald a new “Morning in America”, but investors and stock markets would rejoice the world over.

Private equity may be surprised by America's growth rate

An American Private Equity fund manager told me they are sitting under their desks and rocking back and forward gently, trying to get through this market. I reminded her that the British Empire took about 100 years to decline and the American Empire may be "lite", but the mother land, so to speak, still is a great market. America is still a good place to make money for private equity funds.

China has been attractive for its strong growth and America's growth is being ignored. One exponential non-consensus surprise would be a beleaguered U.S. economy delivering far-stronger post-stimulus GDP growth than expected in 2010.  And maybe even blowing the lights out with an explosive annual growth of 5.0% or better over the next two years, compared with consensus forecasts of 2.5% to 3.5%.

The U.S. has always been an irrepressible economy with impressive resilience.   It remains the undisputed world leader in productivity, in which there is every likelihood of an astounding further recession-induced pick-up.  Helped by a much cheaper dollar, the U.S. is also among the world’s most competitive economies and largest exporters of higher-end goods and services. 

If there are going to be the positive surprises in global economic growth that the IMF and World Bank have begun hinting at, these surprises would more than likely give an added leg-up to an ever-cheaper and more productive America?   I keep thinking of Noel Coward’s ditty: “I like America, America’s OK; I like America, give me the U.S.A.”

Ivey Business Plan competition shows that investors like female businesses

Rick Spence captured the comments given at the Women Entrepreneurs of Canada conference (WEC, is run by Carrisa Reiniger) and one thought was that male investors do not get women's businesses and do not invest. I have personal experience that shows me that assumption is so 90's, but no long relevant in 2010. In fact, Loewen & Partners raised capital for the female led day care firm, Kids & Co, and it does not get more estrogen laden than that. I did notice at the time that the male investors did not even twitch an eyebrow at gender or business focus. After all, as one of the male fund managers said to me on my question about the relevance of gender, "Lululemon is one of the biggest Canadian private equity success stories out there and it is a female product company."
I wrote a letter to the National Post to comment because, honestly, it bothers me when entrepreneurs hid behind some "victim" stereotype instead of facing their brutal facts that they are not clicking with investors because their business is simply not sustainable. If these female entrepreneurs faced the brutal truth, they would be able to adapt all the sooner and go on to get the money they deserve.
For full article: http://bit.ly/whogetsvcmoneymore

Reluctant Partners, Feb. 1.

At the start-up stage, if you look at the Ivey Business Plan competition, for the past two out of three years, a female lead team won. This competition is judged by Bay Street's toughest investors. A female team that did not make it to the finals, Peer-FX, went on Dragons Den and won a deal. That female leader is still in business because she is good at what she does. I wrote an article at the time and asked her about being female in business. I was not surprised when she said it is just not part of her thinking.

Whether you have a uterus or testicles, investors want to know how much money you will make, when will they get their money back and will it be more than if they put it in a blue chip stock in the stock market? If you can show you can give that potential, you will attract investors. End of story.

Barbara Orser, professor at Carlton, has done research to back up these points and says only entrepreneurs who start robust, high potential businesses will get the money.

I do agree that it would be good for women to network and support each other more.

Jacoline Loewen, Loewen & Partners Inc., Toronto

Read more: http://www.nationalpost.com/opinion/story.html?id=2538961#email#ixzz0f9NoetUr 
The National Post is now on Facebook. Join our fan community today.

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. 

Surprised by who won the UK's top green contract?

I was expecting to be bored out of my skull by corporate jargon and those charts dotted with activities on some flow chart, but my first contact with Siemens was the complete opposite. I was in Johannesburg and had organized a "Strategy Summit", inviting a range of companies to present their practices around innovation. 
The Siemens Project Ventures team arrived looking alarmingly like Mr. Smiths in the Matrix movies but then they put up their first slide and blew us away. Their innovation project was examining the fastest uptake of cell phones - South Africa went from zero to 60% within a year. They tied this to looking at the vast geographic ranges with little technological investment and how to make money from that scenario.
These mostly German young men then went on to explain how their findings were being applied to China and India where there were similar technological and geographic challenges.
I was not surprised to read that Siemens Project Ventures  won the British government's contract for a wind farms. If you read the fine print, none of these windmills will be made in Britain, instead Germany will get the jobs, keeping that German engineering competence sharp. Here's part of the story and a link:

The successful bidders for the nine new British offshore wind farms have been announced, paving the way for the UK’s most ambitious renewable energy project, which aims to deliver a quarter of the UK’s electricity by 2020.

Costing £75 billion, the new wind farms will be on a far bigger scale than anything so far in Britain and are expected to create 70,000 jobs.

 However, there is concern that few of the 6,000 turbines will actually be made in the UK. The companies granted licences today to build the farms will not be obliged to source any parts from domestic manufacturers and most are expected to buy turbines made in Denmark or Germany.

Jacoline Loewen, expert in raising capital for companies who want to grow and author of Money Magnet.

Why business owners will benefit from tough year ahead for private equity

The toughest year is ahead for private equity as it will seek to buy companies, putting  business owners in the driver's seat. Valuations are causing the most trouble for both private equity and business owners. This is the traditional disagreement with private equity wanting three times EBITDA while businesses think they should get 12 times EBITDA.

The problem here is that business owners need to realize that this means their company is expecting to grow 12 times per annum. This means getting going in other markets, not just their same-old, same-old. A partnership with private equity would help but they are not miracle workers so workers will need to become more realistic. Here is a great article on the struggles ahead for private equity and how that will benefit business owners - written by Financial Times:

There is a suspicion among investors that when a private equity company is seeking to raise a new fund it seeks to sell some of its best-performing assets to keep its backers happy by returning some cash to them.

Stephen Schwarzman, Blackstone's chief executive, has told investors his group plans to float eight companies and sell five this year. In the UK, Permira has promised to return a "wall of cash" to investors. This could trigger a wave of buying opportunities for other private equity groups, as many of these companies have no obvious trade buyer and may not make ideal flotation candidates.

In some cases, buy-out groups that raised their last fund in 2005 - such as BC Partners and Cognetas - are nearing the end of their five-year investment periods.

After a private equity group goes beyond its investment period it can no longer do new deals, unless investors grant it an extension or if it raises another fund. This could leave some big buy-out houses out of the market, at least temporarily. Several buy-out groups are in the happier position of having recently raised big funds, such as Hellman & Friedman, First Reserve, TPG, CVC Capital Partners, Warburg Pincus, Nordic Capital and Advent International.

Yet with bank debt still in short supply and the recession failing to produce the expected flow of opportunities to snap up good companies on the cheap, these groups are having to work harder to put their capital to work.

As buy-out groups still have about $450bn of "dry powder" left to invest, there is fierce competition for the best opportunities, which is pushing up prices.

Jacques Callaghan, head of private equity at Hawkpoint, the investment banking boutique, says there are more than 65 private equity groups that can still write a £100m equity cheque for a deal in Europe.

"A number of firms are going to feel under pressure to invest in the next year or two, or they will face calls to reduce their fund size," says Mr Callaghan.

So even those buy-out bosses who fulfil their New Year resolutions by raising fresh funds will still face pressure to show they can spend the money on attractive deals.

This is good news for businesses who are thinking about selling in the next five to ten years. Make it your new year resolution to find out more about private equity investors. 

Jacoline Loewen, expert in helping business owners get the money and the partners they deserve.
National Post video interview: http://www.financialpost.com/video/index.html?category=Financial+Post&video=XgmEI_w_0T1ljmKoXzmCCjo_6u1hka1w

Sellers of businesses seeing the last of private equity

Listen up sellers of businesses. You may have been chased relentlessly these past few years by private equity funds wanting to invest. Here's a warning. Those times may be coming to an end within the next five years. 

Just as industry has been outsourced, so is capital now rewarding those emerging markets too. Money is flowing to China and India and that means less for local comapnies. Here in Canada, funds are still doing well raising new capital as our banks do have money to lend at good rates, allowing the private equity model to work. Elsewhere in the wolrd, the tide of money is retreating. Here is an article from the Financial Times. You need a subscription to read it all but I pulled a few key points.

As private equity bosses consider their New Year resolutions, many are likely to commit themselves to overcoming the meanest fundraising market in the industry's history by raising a fresh pool of capital. This tough challenge will separate the buy-out industry's sheep from its goats as increasingly choosy investors decide which groups deserve to be given more money to invest and which should be left to wither away.

Being starved of fresh capital is the kiss of death for a private equity group, giving it little option but to go into run-off, slowly selling off assets to return cash to investors. Some groups have already been forced out of the market. In the UK, Candover terminated its new €3bn (£2.66bn) buy-out fund this month after struggling to meet its own €1bn commitment.

Alchemy Partners has suspended new investments until at least 2011 after its founder Jon Moulton's shock departure plunged it into crisis earlier this year. Next year, scores of private equity groups are expected either to exhaust the capital available in their existing funds or to reach the end of their fund's investment period. This is likely to push some of the world's biggest buy-out groups - including Kohlberg Kravis Roberts, BC Partners, and EQT - to take the plunge and start fundraising in 2010. Some are already on the fundraising trail, such as Lion Capital, which is seeking €2bn for consumer goods buy-outs, and HG Capital, which has raised half its £2bn target.

But as investors are still smarting from big paper losses after the massive buy-out deals of the credit bubble, there is unlikely to be enough money to go round. As a result, next year could produce a shake-out in the private equity industry, rewarding the better performers with capital and leaving others to expire.

Partners Group, the Swiss fund-of-funds, has forecast that a third of buy-out groups "will be unsuccessful in raising meaningful amounts of additional capital for future funds and will eventually dissolve".

Jacoline Loewen, expert in private equity, author of Money Magnet, described as the best book on private equity by Austen Beutel.

7 Habits of Investors in Inefficient Markets

What is the market up to? I get to listen to the market, or at least a fairly large part of it, as I belong to a finance club with Bay Street's smartest money guys. Collectively they control several billion Canadian dollars, so when they talk, I listen. Over the last five years, since I joined, I have listened to leaders of public companies, owners of private companies, stock promoters, investors and many more. Yet few of these people spoke about the big crash coming up in 2008.
As we leave the decade of the "Naughts" and wrap up lessons learnt about markets in the past ten years, I realize that even this club of such smart men and women followed the markets off the cliff in 2008. What were they thinking?
Back in 2007, Paul Krugman summarized the seven habits that help produce the anything-but-efficient markets that rule the world. I thought a great way to begin the next decade would be a quick review of these:
Seven habits that help produce the anything-but-efficient markets:
1. Think short term. 
2. Be greedy. 
3. Believe in the greater fool 
4. Run with the herd. 
5. Overgeneralize 
6. Be trendy 
7. Play with other people's money 
I got these 7 habits courtesy of Paul Krugman, quoted in Fortune back in 2007. Worth contemplating.
Jacoline Loewen, author, writer, and expert in private equity.

Movers and Shakers in VC Circles

Private equity is increasingly the phrase used for larger Venture Capital firms. There is also a more regular career track beginning to form for many top VCs. Private equity professionals increasingly either move from an operations role or from corporate finance. 

The last year saw interesting career moves for industry professionals in the emerging markets along with transition from big to small firms or shifts from industry domains to private equity. In the emerging markets with high growth, talent does get ahead, whatever the gender, which will be the challenge for the Americans. 

One such high rising female in India is Vishaka Mulye. She took over from Renuka Ramnath as the new MD & CEO of ICICI Venture in April 2009. A career banker who joined ICICI group in 1993, Mulye has occupied various roles in treasury, structured products and insurance. She was the CFO of the bank between 2005 and 2007 and later the CEO of ICICI Lombard General Insurance. Her appointment at the helm of India's largest private equity fund (with about $2 billion fund under management) has catapulted her into the big league.

Jacoline Loewen, Expert on private equity and author of Money Magnet, Attract Investors to Your Business.

Read more

How would you learn from your lousy leader?

Douglas Adams once noted: "Human beings, who are almost unique in having the ability to learn from the experience of others, are also remarkable for their apparent disinclination to do so."
On the same theme, Keith McFarland was in Toronto to speak to the YPO Leadership Forum. He is the author of The Breakthrough  Company and talks about the impact of leaders who have not matured. Keith talks about one leader who said "All Buyers Lie". This negative attitude to customers impacted terribly on his long term revenues eventually.
Here's a quick story I valued from Keith in BusinessWeek:
The hotshot vice-president who took over the marketing group where I worked when I was in my 20s was a great anti-mentor. Arrogant, quick-tempered, and controlling, it took him only about six months to turn a great department into a loose collection of warring fiefdoms. I knew I wanted out, so I observed what I thought at the time was proper etiquette:
me out of it but finally relented, extracting only one promise: I would allow him to tell the president of our organization about the change.

What I didn't know at the time was that he and the president were at war over some of the same issues that were causing me to flee and that he intended to use my departure as a weapon against the president, who had been my friend and sponsor for a number of years. So my boss said I was leaving my post because I was tired of the president meddling in the affairs of our department. Nothing could have been further from the truth, but the president appeared to believe him and was so offended by the statement that it took several years to repair my relationship with him.

What did my first anti-mentor teach me? That people, even those you view as untrustworthy, are essentially reliable. Wait, hadn't this person betrayed me by lying about my motivations for leaving the job? Yes, and that's precisely my point. His actions were entirely consistent. I knew he was selfish, manipulative, and insecure. So to expect him to behave otherwise was bad judgment on my part.

I realized right then that people are surprisingly dependable and vowed to use what I knew about them to predict how they're likely to act. When my boss asked me to let him relay my move to the president, I should have been on my guard. I should have said: "You know, my relationship with him goes back almost 10 years, and I wouldn't want to offend him by not telling him myself."

The funny thing is, as the years have passed, the anger I felt for my first anti-mentor has dissipated. The lesson to treat every person as reliable (based on who they really are) has served me well as an entrepreneur, whether I'm dealing with colleagues, investors, or customers.


Posted by Jacoline Loewen - see YouTube interview with National Post: VIEW