Exempt Market Dealers Association offers 1.5 CE credits Course

Private Equity: Opportunities in Canada and Beyond

Presented by CFA Society             Supported by Exempt Market Dealers Association EMDA

 The Canadian Private Equity industry is more vibrant than ever, and is increasingly seeing greater deal volumes and variety.  Speakers at this session will provide insights stemming from their active involvement with private equity deals that range from small to super-large, and related to investing across Canada and globally. 

Date:	Tuesday May 17, 2011
Time:	11:30 AM - 2:00 PM
Location:	The National Club Main Dining Room 303 Bay Street Toronto
CE Credits:	Eligible for 1.5 CE credits

David Austin, CFA (Northleaf Capital Partners), Jacoline Loewen (Loewen & Partners ), Kamal Pastakia (OMERS Private Equity), and Gerhard Pries (Sarona Asset Management ) will share their knowledge and experiences in the sector, highlight opportunities/constraints and discuss future prospects for Canadian private equity investment in Canada and internationally.

 Who Should Attend

Professionals involved or interested in the private equity and alternative investment space.  Private equity practitioners, portfolio managers, analysts, private client investment professionals, wealth managers, investment advisers, consultants, family office professionals, and private bankers.

 Registration Details

Register here or email eventregistration@torontocfa.ca to receive the CFA Society member rate of $65 ($85 registration fee for non-members)

Learn More (This is an embedded link to the CFA Society event page)

How did Flickr beat WebShots?

Website technology is going through the next change that impacts big organizations, threatens them, in fact. The scavenging weeds are always hard at work pulling down the mighty oaks of industry. Sean Wise has a great interview with Don Tapscott on what is the biggest impact on technology for companies.

If you look at internet traffic for various properties, in each case, an old HTML web site gets eclipsed by a new XMP based community that harnesses the power of self-organization.

Don Tapscott says:

The immutable, standalone Web site is dead. In fact, I've banned the word "web site" from my company. Today, people are engineering software, databases, and Web sites so that they not only meet private objectives, but they can be used in ways the originators did not know nor intend. It's now getting easy to build new Web services out of these existing components by mashing them together in fresh combinations.

The result is that today's most exciting and successful Web companies and communities are stitching together their own services from shared databanks and Lego-style pieces of Web software. Rather than define the user experience and publish information for people to observe, they use Web services to create platforms for people to self organize and co-create with their peers. And it's pretty much true that when they built it, people came—usually by the tens of millions. In fact, 2006 was the year when the programmable Web eclipsed the static Web every time. 

• Flickr beat WebShots; 
• Wikipedia beat Encyclopedia Britannica; 
• citizen journalist bloggers beat CNN.com; 
• epinions beat consumer reports; 
• upcoming.org beat evite; 
• Google maps beat mapquest; 
• Myspace beat Friendster; and 
• Craigslist beat Monster.

That is a shocking list and well worth discussing with your team. If you are a good size business (revenues at $30,000) there is a great deal of exciting private equity out there looking to invest in smart business owners who are looking at the big changes.

Jacoline Loewen, Panellist on The Pitch.

Has Canada missed the boat in Asia asks Gordon Perchthold, Ivey Business School HK

Great marketing is whipping the puck up the ice on a power play – at least every now and then. Someone I respect (his book is probably the best on consulting) is Gordon Perchthold.  He is in Hong Kong and The RFP Company helps companies enter Asia rapidly. He knows how Vietnam differs from Korea and where to focus scarce resources.

Gordon is nimble minded and has helped many companies get over their fear of the dragon. Gordon set up a debate with Ivey Business School in Hong Kong to discuss “Canada has Missed the Boat to Asia.” We held the same debate in Toronto and Gordon was kind enough to include me. My son attended and told me I overdid the debate style of picking on my opponents!

But I did get to study Asia and speak to many business owners about their experience in this massive country and it has added to my strategic focus. This change may bake a huge difference for me in marketing to a massive client in Vancouver. I had not included Asia!

I had to debate why Canada has not missed the boat in Asia (and especially China)...

Here are a few points:

·         Commodities are fungible so any upward effect China has had on the price of say oil or lumber has benefitted Canada regardless

·         Canada has welcomed Chinese investment (arguably more so than Australian! c.f. Athabaska vs. Potash!)

·         Canada has redirected exports away from “Due South” to across the Pacific (energy, lumber, food, minerals, fish, potash)

·         Canada has “benefited” via a stronger C$, one of the world’s leading commodity currencies. China has contributed to the C$’s strength.

If Canada has missed the boat, it is probably because its corporates have not been as active as they could have been. But has not RBC always been Li Ka Shing’s lead bank forever? BMO is seen to be  close to the Chinese hearts. And RIM and Bombardier are doing well in Asia, aren’t they?

Canada’s Asian community has also ensured a close connection viz. Honkouver!

Truth to tell, best argument is the counter factual: it is hard to think of much more Canada could have done that it has not already done!

Private equity also doing debt for the Dividends cash flow

There used to be a time, during what some called the Great Recession, that American Capital, one of the oldest American based “business development companies” BDC, was struggling amid a stock market slump and a liquidity crunch. It wasn’t pretty.

Fast forward to today, American Capital’s woes from the past didn’t seem to deter any latecomer to the business development company game. More than 20 companies have filed to launch new American BDCs over the past 12 months, compared with a trickle of such filings in 2008 and 2009.

Investors are hungry for yield, and BDCs provide that thanks to their quarterly dividends.

“There are few alternatives to high-yield products, and BDCs provide an attractive option,” said Steven Boehm, a senior partner of law firm Sutherland Asbill & Brennan LLP that specializes in structuring and advising BDCs. “It’s a sexy product.”

Equally seductive is the prospect of having a permanent source of capital, a dream of private equity firms that dread the distraction and cost of raising private funds.

But the commonality of the new BDC hopefuls and their older brethren stops here. The younger crop looks a lot different. For one, it promises to use less leverage in their investment – a lesson well learned from American Capital’s problems. (American Capital itself has learned, too –  Wilkus said recently that “it became evident during the recession that we were overleveraged, considering our asset mix,” and “we intend never to repeat that.”)

In another difference, many of the new BDCs plan to buy debt as opposed to equity in midmarket companies, which certainly would help their dividend-paying ability.

4 reasons to think twice before "doing what you love."

A Rotman lecture by Danial Pink, author of Drive, is available on iTunes "BigIdeas" podcasts, and as I listened to him late at night this week, I mulled over his push for people to work in jobs that they love. 

Pink went to law school and dropped out of the whole, restrictive, boring law career. He says, "Law school was the worst thing I did." 

Yet, I listened to him because I know he went to law school, is able to express himself logically and is not a delusional, "just say what you want and it will happen" expert type. I can understand why people love his point about doing what you love, but life is tough and gets in the way. My business just signed up with a superb business owner to help him transition his business. We spent 18 months working with him and his wife to show how our company will help his family business achieve the wealth he needs to retire. 

Was I doing what I love? Not totally. I hate negotiating the engagement. I hate discussing the amount of debt and family shares owed. I hate picking up the check for our work fee - I find that awkward. But I do it. I have to ask for the job, go through the value and why our fee is fair, explain the engagement letter, pass it back and forth with a hundred changes, get his signature and ask for the check to start work. I hate that but as a small business owner, I had better be very good at this detail and arm wrestling because it is what sets us apart. Besides the work I love to do, if I want to be successful as a business owner, I had better be good at those skills my MBA taught to me and believe me, that was not painless either.

Once I am through that sales close, now, it is exciting. Persuading a family business owner to do what is in his best interest is far from what I love to do, but I know how happy this man will be within a few months once we improve his wealth situation. I know how it will improve his family relations with his sister and father. 

So here are 4 reasons not to do what you love:

1. You love it — but you're not fantastic at it. There is the 10,000 hour rule of how much you need to invest to become very good. If you do not have the body type, you will never be a ballerina. Same with intellect. The women who started up Zipcar over day care were not just thumb sucking an idea. They were both experts in transportation and engineering. How good? MIT and Harvard PhD good. Lots of women come to me with ideas for start-ups and they are passionate about green and pollution by cars, but do not have the intellectual backing to add depth. Without competence, passionate people would not get the start up funding Zipcar attracted.  It is hard to judge yourself accurately, so ask your friends and employer what your talents and weaknesses are, and then play to your strengths, even if they don't lead you to what you would currently describe as your "perfect" job.
2. You're skilled at your passion — but hate the work that surrounds it. Many businesspeople are masters at their craft but drop the ball when it comes to everything else. One of my clients is a brilliant Day Care operator who set up in-house child care for big companies. But — although she loved working closely with clients and helping them create employee benefit programs with her Day Care — she was simply unable to manage her pricing and cash flow. She had boxes of unpaid checks in her basement. It's possible to learn these skills, but, for many, the process sucks the joy out of their chosen field and small business. (Michael Gerber writes about this extensively in The E-Myth).
3. You're too emotionally attached. You've already heard about Marion Stoddart. I recently heard Charlaine Harris, author of the wildly popular vampire series that spawned the TV show True Blood, talk about this issue too. The best writers, Harris said, don't fall in love with their characters, or their words. They don't mind being edited; in fact, they're open to any suggestion that makes them better. Writers who get too close to their work and take criticism too personally never improve. As an author, I learnt that a long time ago. Your work improves with others commenting. Business people also need to look carefully at whether passion for their work is clouding their judgment. When you care deeply about a pet project, for example, it's hard to make a rational decision about whether it should live or die.
4. No one will pay for it. You can turn a hobby into a job — but only if someone's willing to pony up. Sometimes the market's just too small (luxury vacation planning for couples honeymooning in Cape Town). Sometimes the margins are too thin - decorating business targeted at Divorced Dads. And sometimes your company simply has other priorities (no matter how many times you offer to move the business into web video, your boss wants you to get your actual job done, and today please).

Another Private Equity Fund for China

Alibaba, the Chinese e-commerce company, had a nasty investigation in February. The former CEO of Alibaba, David Wei, has left and is now raising a $200 million investment fund for his new firm, Vision Knight Capital Partners, focusing on China’s red-hot e-commerce, retail and consumer goods sectors. 

And he’s teaming up with his former boss and one of China’s richest men, Jack Ma, the founder and chairman of Alibaba, which is partly owned by Yahoo Inc. Ma is providing some of the money as a limited partner. Wei says his fund will look to back deals from other investors’ portfolios in an effort to turn them around using the operating experience he gained from years spent working in China’s consumer goods industry.

What happened to having a clean track record and not being able to raise capital if there is an ongoing investigation? That is proof of the fast, expanding market that is called Asia. There is so much to gain since you are not taking market share from other companies - just filling a void.

Read More...

My book choice for your business

Business owners will suspect John Warrillow has followed them around with a video camera as he describes
how the typical service business operates and what needs to change to improve the dollar value of the business. This entertaining, but very important book should be at the top of the reading list for any business owner of a service company. The suggested steps and easy tweaks to current practices will add a substantial increase in valuation for a service company. Entrepreneurs will be surprised at how much Built to Sell will add to building a stronger business and appreciate the knowledge gained when it does come to time to sell.

For John Warrillow

Office 1-416-628-0780
Mobile: (33) 06 40 36 61 42

Twitter: @JohnWarrillow

Good private equity funds still attract large investments

Some private equity firms may be having problems fund-raising but don't tell that to Berkshire Partners.

The eighth fund of the Boston-based firm is clocking in at $4 billion, three sources said. Berkshire Partners, which only began fund-raising in late January, is expected to announce a first close in the next week, a source said.

A final close for Berkshire Fund VIII LP is seen coming 60 days after. "There was massive interest," a second source said. "This is one of the must-have funds of 2011."

The firm's prior fund, Berkshire Fund VII LP, closed at $3.1 billion in 2006. The one before that collected $1.7 billion in 2002. Fund VII had generated a net IRR of 6.9 percent as of September 30 for backer California Public Employees' Retirement System, while the sixth fund had produced a net IRR of 23.2 percent.

Berkshire Partners, which pursues leveraged buyouts, growth capital deals, take-privates and related transactions, typically invests between $50 million to $500 million equity per deal. Sectors of interest include consumer products, retailing, business services, transportation, energy as well as manufacturing and communications.

Last week, Berkshire Partners recapped Engineering Solutions & Products, a government services provider. In January the firm teamed up with Rhone to make a minority investment in Coty, the beauty company.

While private equity fund-raising is rebounding this year, firms have been taking longer to close their funds. The Gores Group took about 18 months to collect its third fund, which came in at $2 billion. EnCap Investments spent an estimated nine to 10 months raising $3.5 billion for its eighth upstream energy fund.

Watch how you present yourself to Finance types

Teaching Growth at Rotman University, to the top entrepreneurs of Canada is a privilege and I enjoy it greatly. Yet, I was stunned when one of the $3M revenue business owners chatted with me.

“I have to get some money. How do I get some money?” that was the opening sentence to me. She put on a cute, begging face – my kids used to do that to me when they wanted to go to MacDonalds and get the kiddie meal with a toy. 

She said, “I am so disappointed with the banks and BDC, they will not give me a loan. I have been a client of theirs for years; I wrote them a letter giving them a piece of my mind. What do I do with finance people like that who just do not get it?”

I was exhausted before we even began. 

This business owner had a copy of my book, Money Magnet, on the desk in front of her, yet had not flicked through it before speaking with me. Even one page would have given her more of a clue how to connect to finance people. For her, it was all about her and this ghastly situation for her. She may have realized that her company was actually attractive to Angels as she has good cash flow. She is also passionate about what she does. Double points.

Business owners talk like this to finance people who have access to a great  network of potential investors. This owner had given me a huge message about her style. Why would I put Loewen Partners' reputation on the line by making a call? If I did that favour, pretty soon, no one would pick up my phone calls. I asked her if she had a business plan. Nope. An income statement - maybe. OK, now we were making positive inroads.

As I probed, I could see she had a viable business and would be attractive to the right fit of investor. Since I work with $20M revenue companies and up, she was too much of a "can you do it for me?" type, for me to make any revenues and she would be too tough to mentor. I doubt she would ever touch my book again.

 Pass!

Instead, she could have opened with a few sentences (after describing her revenues and market) that would have caught my attention. Any of these would have made me see she had built and sustained a good business. Any of these door openers would have kept the conversation flowing because they are positive and business smart:

Conversation Openers with Finance Experts

1.      I have a great Business Model – We do loans for plastic surgery and I have been in business since 1998 and been profitable every year with strong cash flow. Our business has grown by 20% each year.

2.      We have a stunning Revenue Model – we have Margins of 60%. With another $200,000, I can add 2 more sales reps which drives the growth. I am looking for an Angel interested in financial services, near to Markham.

3.      There is Competition, like credit cards or the banks.

4.      Key Differentiating Feature – we have close links to the top 10% of plastic surgeons. So we make sure the client goes to good surgeon who also gives us a good price.

5.      Unique Selling Proposition- Secret Sauce – we are niched, focussed on plastic surgery.

6.      Addressable market – Can give the plastic surgeons a referral fee to advertise us on their websites and draw in clients.

BNN The Pitch - 5 Typical Questions

"Before I go on The Pitch," says Jacoline Loewen, "I get a one page outline about the company that is seeking the capital.  This brief summary will sprinkle clues throughout the description about how ready the owner is to get financial investment dollars. Typically, I like to give the outline a run through my standard framework which I detail in my book, Money Magnet."

As a business owner, you could discuss these at your next business meeting with your team. Try one question a week and you are now doing strategy extremely well:

6 Questions to Grow Your Business

1.     What has changed in our industry (e.g. impact of Asia) and why is it now the time for a company like ours?

2      How are we different from the competition - our processes, our product?

4.     How is our customers' environment changing and what new pain does it bring? 
     Are we focussed on how our company is stepping in to help soothe that pain?

5.     Will this pain be enough to get customers to switch to our offering?

6.

The Pitch

thepitch@bnn.ca

The Pitch is an exciting new weekly show from Business News Network that hooks up Canadian entrepreneurs with the risk capitalists who are sitting on the real money... the money that brings ideas to life.  During the program, start-up entrepreneurs or companies seeking to take their business to the next level will sell their business idea - and the amount of cash needed - to a panel of tough financiers and experts.  The panelists will either give the pitch the green light or send the dreamers back to the drawing board.  It's a fast-paced half-hour hosted by BNN's Andrew Bell. And it's 100% live, giving viewers a chance to see how the entrepreneurs perform in a high-pressure atmosphere.

Wednesdays at 11:30 a.m. ET / 8:30 a.m. PT