Wealth Management

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

January 30, 2012

Should I hire a broker or investment banker to help me sell my company?

An important question for an owner wanting to sell their business is, "Should I hire a broker or investment banker to help me sell my company?


The answer to this question is “maybe.”
The fees charged by intermediaries are significant. However, there are scenarios when qualified intermediaries can add significant value far in excess of their fees.
For example, if your company has performed well for the past two to three years, you want to sell most or all of it, there are a large number of potential buyers and you have no idea who the right buyer will be, a sale process run by an intermediary potentially can generate a much higher value. Another scenario is where the intermediary has particular expertise and experience in your industry, and there is “story” required as part of your sale presentation. If there is significant risk to your business if the word leaks that you are selling, you are likely better off working with a smaller exempt market dealer than a transactional lawyer.
If you want to save on lawyers’ fees, a good exempt market dealer will make sure the bulk of the work is done before calling in expensive lawyers.
There are many scenarios where an intermediary will not add value. For example, if you know the one or two likely best buyers, then you should be able to maximize value with the assistance of an experienced transactional lawyer (which you need regardless).
Private Equity likes to use intermediaries, exempt market dealers, when selling their own portfolio companies.
Often it’s a good idea to seek the advice of your accountant when making this decision. If you decide that you need an intermediary, please do not base your decision on the firm name. Be sure that the individuals that will be representing your company (often not the senior partner that comes in for the dog and pony show) have the talent, experience, time and drive to get your deal done. 
Speak to the local ExemptMarket Dealer Association in your geographic area.




Jacoline Loewen is a Director of Loewen & Partners Inc., an Exempt Market Dealer, specializing in finance for owner operators and family businesses, specifically acquisitions, restructurings, sales, successions, strategy and private equity financing.
Jacoline began her career with Granduc Mines, Northern BC, and then Deloitte in their strategy unit. She developed a strategic planning model and published it in a book called "The Power of Strategy”. She also wrote "Business e-Volution" and “Money Magnet: How to Attract Investors to Your Business” (Wiley), which has been used by Ivey as a text book.
She is a Director on the Board of the Exempt Market Dealers Association (EMDA) responsible for brand and communications. She is on the advisory board of DCL International, Bilingo China and Flint Business Acceleration. She has been a Director for other Boards such as the Strategic Leadership Forum.
She is a regular panellist on BNN: The Pitch, a contributor to the Globe & Mail and National Post, serves as a judge for the UBC and the Richard Ivey School of Business’ Business Plan Competitions and is a guest lecturer at Ivey and Rotman Universities. Jacoline holds an arts degree in Industrial Relations from McGill University and a MBA from the University of the Witwatersrand.  Her MBA thesis was selected by Cambridge University and published by Cambridge’s Engineering faculty. 

January 29, 2012

Capital gains key component to Romney’s tax strategy

Different types of taxes seem too difficult for Americans to understand. With our sales tax HST, Canadians may understand the distinctions.
I do find it interesting which media sources like to just give the percentage and no elaboration on whether it is income tax or capital gains tax. The charity donations are also worth comment.
Here is a Palm Beach article on the topic.
Capital gains key component to Romney’s tax strategy

January 27, 2012

Tony Clement - Canada's best years are ahead of us

The best years are ahead of Canada. These positive words were part of Tony Clement's speech yesterday at The Empire Club, Toronto, just yesterday.
Clement has applied government resources towards helping business in a consistent and positive manner; this is noted and appreciated. Here is an excerpt from his speech well worth the read.:

Speech by Tony Clement, President of the Treasury Board of Canada, to the Empire Club of Canada

Thursday, January 26, 2012
Toronto, Ontario
A leading American historian and senior advisor to former U.S. secretary of state Condoleezza Rice has finally admitted the truth—Canada won the War of 1812.[1]
The year after that struggle came to a close, another Canadian hero was born—the great architect and visionary of the Canadian state, Sir John A. MacDonald.
"We are a great country," he said, "and we shall become one of the greatest in the universe if we preserve it; we shall sink into insignificance and adversity if we suffer it to be broken."[2]
Sir John A. saw clearly the road ahead. And he formed this country with the values of the Empire in mind—freedom, peace, justice and the equality of people.
Over the years, those values have asserted themselves in Canadians in times of crisis.
We see them in our sacrifices at Vimy, Ypres and Paschendale, in Normandy, Korea and Afghanistan.
And we see them in our compassion and aid for the victims of earthquakes, tsunamis and disasters in foreign lands.
Canada has come a long way in 200 years. We have grown and evolved into the one of the most successful countries in the world.
When British Prime Minister David Cameron visited Canada last September, he acknowledged Canada’s leadership at the start of this new century.
In a speech to Parliament, he suggested Canada had everything it needed to succeed, and passed the torch.
He noted our leadership in two areas vital to success in the 21st century—innovation and education.
"From Blackberry to Canadarm," he said, "yours is a home of innovation and technology."
He also congratulated Canada on its diversity, saying the way we had “integrated people from many different backgrounds into a mature democracy is a model from which we can all learn.”
And the British Prime Minister is not the only one who believes in Canada these days.
Our economic leadership during the global economic crisis of 2008 has been recognized around the world.
Last year, both the International Monetary Fund (IMF) and Organisation for EconomicCo-operation and Development (OECD) forecasted we would have among the strongest economic growth in the G-7 in 2011, and again this year.
And for the fourth year in a row, the World Economic Forum rated the Canada’s banking system as the world’s soundest.
In addition, three credit rating agencies—Moody’s, Fitch and Standard & Poor’s—have reaffirmed their top investment-grade ratings for Canada.
And Forbes magazine recently ranked Canada the world’s best place to do business.[3]
By any standard, Canada has weathered global economic crisis and ongoing financial uncertainty well, particularly when compared to most other developed nations.
Since introducing Canada’s Economic Action Plan in response to the economic downturn of 2008, we have recovered more than all of the output and all of the jobs lost during the recession.
And almost 600,000 more Canadians are working today than when the recession ended, resulting in the strongest rate of employment growth during the recovery by far amongG-7 countries.
And real GDP is now significantly above pre-recession levels—the best performance in theG-7, according to the IMF and OECD.
But our country is not out of the woods yet.
As we emerge from the worst recession since the Great Depression, we know Canadian families are worried about their jobs and their financial security.
While we understand that the government’s role is to create the conditions in which Canadians will thrive, we also believe that it is the ingenuity, the aspirations and the determination of Canadians that will be the driving force behind economic growth and jobs.
So, in the time I have remaining, I would like to tell you about the things we are doing to help make that happen.
I’ll mention just three.
The first is reducing the deficit and balancing the budget over the medium term.
The second is freeing businesses to grow by cutting red tape that can stifle productivity.
And the third is creating opportunity through our move to Open Government.

REDUCING THE DEFICIT

Throughout our history, Canadians and their government have learned valuable lessons from economic crises.
Today, Canadians understand the necessity of reducing the deficit and returning to fiscal balance in the medium term, finding savings within government spending, and taking targeted actions when necessary to support the recovery.
This is our balanced approach that will boost our efforts to achieve a sustainable and prosperous recovery, and preserve our Canadian economic advantage now and in the future.
Canadians understand this. And in last May’s federal election, we received a strong mandate to eliminate the deficit, keep taxes low and continue creating jobs for Canadians.
In the Budget that followed, we announced our plan to return to a balanced budget while keeping taxes low.
Building on previous efforts to reduce government spending, we launched our deficit-reduction initiative.
This review is about more than finding savings. It is about modernizing government.
It’s about retooling for the future—and providing the right programs and services at the right cost to support Canadians’ success in the years ahead.

FREEING BUSINESS TO SUCCEED

But as a country, we need to come at the challenge of creating economic growth and jobs in Canada from several different angles.
That’s why, in addition to getting our fiscal house in order, we are making sure the people, businesses and communities in Canada have the tools they need to succeed.
That brings me to our second key initiative—cutting government red tape to free businesses to grow.
We believe red tape impedes economic productivity by taking up precious time and resources, and curbs the entrepreneurial spirit.
Cutting red tape helps business focus on what they do best: sustain the economic recovery by creating jobs and generating wealth.
It also spurs innovation by leaving a clear regulatory picture for entrepreneurs, and a marketplace that is easier to understand.
Prime Minister Harper set out to realize all these benefits when he set up the Red Tape Reduction Commission last winter.
This Commission issued its final report earlier this month.
And as a sign of our commitment, we are taking action to implement a “One-for-One” Rule to control administrative burden on business.
This work is just one example of how we are helping businesses grow and invest for the future.

OPEN GOVERNMENT

The third initiative I’d like to mention is Open Government.
Open Government allows Canadians to not only learn about, and participate in government, but also to create new products using government data and information.
Last spring we launched this initiative through three main streams.
Open Data, which is about offering Canadians Government data in a more useful format to reuse in innovative ways.
Open Information, which is about proactively releasing information, including information on government activities, to Canadians on an ongoing basis.
And Open Dialogue, which is about giving Canadians a stronger say in Government policies and priorities, and using Web 2.0 technologies to expand citizen engagement with government.
By tapping into the ideas and talents of our citizens, we can be more responsive to meeting their needs.
In fact, earlier this winter, we held an Open Government on-line consultation, and Canadians gave us some great suggestions.
We also held the first-ever, Government of Canada tweet chat to generate discussion about Open Government.
Open Government can also strengthen transparency and accountability in government, and a strong democracy is essential to a nation’s economic success. I’m a true believer in this.

CONCLUSION

Let me conclude my remarks today with one final observation about our need for economic growth and jobs in these challenging times.
Over the years, Canadians have learned that chronic deficits are a mortgage on our future. Chronic deficits create higher taxes, less opportunity and less freedom for our children and our grandchildren.
Ultimately, they squander the opportunities that have been given us.
That’s why we must stick with our low-tax plan for jobs and growth—a plan that has worked and served Canadians well.
I believe Canadians can overcome any challenge. We always have—as long as we never waste our treasure or lose faith in ourselves.
As Winston Churchill said when he addressed our Parliament during the bleakest days of the Second World War, “we have not journeyed all this way across the mountains, across the Prairies, across the centuries, because we're made of sugar candy.”
Freedom, hard work and sacrifice have got us where we are today, and leadership, fiscal prudence and helping Canadians achieve their dreams will take care of tomorrow.
It’s not always easy, but as history shows, it is doable.
And the benefits for us and for future generations will be immeasurable.
Thank you.

January 25, 2012

Angry Birds Attack the Leadership of RIM

RIM is getting whacked for its leadership reshuffle. The market remains unimpressed.
Running even a profitable business is no guarantee that last year's performance will be repeated. Customers need to be convinced again. Retailers need to be encouraged. employees need to be motivated. Alliances need to be maintained.
Margaret Wente writes harshly about the RIM leadership and gives a scathing indictment to the two billionaires. She probably has a point and someone should have been telling these two to focus on their business and check out apps.

Back in 2007, Mike Lazaridis and Jim Balsillie were like gods. Everyone agreed the Research in Motion CEOs were the two smartest guys in Canada, and possibly the entire world. Anyone who was a someone owned a BlackBerry. A BlackBerry meant you were a player. Even Barack Obama had one! But even if you didn’t, you cheered for RIM because finally we could forget the hideous national embarrassment of Nortel and hold our heads up in the world. Thanks to them, our whole country was a player!

When Roman emperors paraded through the streets in triumph, they used to hire a slave to whisper in their ear, “Remember, you are just a man.” Maybe Mike and Jim should’ve tried that.
When Steve Jobs unveiled the first iPhone in 2007, Mike Lazaridis trashed it. He told his employees nobody wanted to have a personal computer on their phone. Back then, RIM commanded nearly half the U.S. smartphone market. Today, it has more like 10 per cent. Not only do people like to have computers on their phones, they also like to waste millions of hours playing Angry Birds. Who knew?
The worse things got, the more arrogant they became. Last spring Mr. Lazaridis walked out of a BBC interview because he didn’t like the question. “You implied that we have a security problem; we don’t have a security problem,” he said. “We’ve just been singled out because we’re so successful around the world. It’s an iconic product, used by business – it’s used by leaders, it’s used by celebrities, it’s used by consumers, it’s used by teenagers – we were just singled out.”
Then there was all that money. Funny things happen to people who get stupendously rich. Instead of dreaming night and day about the next great product, they start to dream about building the most spectacular mansion in the entire country, or buying a National Hockey League team. Mr. Lazaridis’s construction project (a 24,000-square-foot “cottage” on the shores of Lake Huron) has been going on for years. Mr. Balsillie spent three years haggling for the Pittsburgh Penguins, the Nashville Predators and the Phoenix Coyotes.
Meanwhile, Mr. Jobs was dreaming up hit products that people would line up overnight to buy. As Toronto money manager Tom Caldwell said, “Once the CEO is building the maxi-yacht or the great mansion or trying to buy hockey teams, he is not paying attention to his business, in my mind.”
Mr. Jobs despised tech billionaires who acquired mansions and fancy toys. “I’m not going to let money ruin my life,” he told his biographer. He had no taste for “that nutso lavish lifestyle that so many people do when they get rich.” The trouble is that people who get rich get fat and soft. They’re not hungry any more.
Mr. Jobs knew that if you stop swimming fast enough, you die. He was a screaming perfectionist who cursed out his staff when they moved too slowly, or when some product detail wasn’t good enough. Meanwhile, last year, when RIM released the PlayBook, which was supposed to compete with Apple’s iPad, it was a miserable flop: It couldn’t do e-mail. It had no Skype, no GPS, no Angry Birds. As a New York Times tech reviewer wrote incredulously, “There’s no app for that.” It wouldn’t even fit into the breast pocket of a jacket.

January 24, 2012

Where was RIM's Board of Directors?

RIM leadership may have got arrogant but they also gave a great deal to the Canadian entrepreneur scene. Jim Balsillie was generous enough to give me an interview in 1999 for my book, e-Volution: How to use the Internet to grow your business. He has done his strategy very well - something I see rarely done by Canadian owner/founders.
All this talk we are hearing from the USA about how "private equity destroys jobs" and "capitalism is evil" completely by passes the fact that humans create businesses and destroy businesses. The best businesses rarely go beyond a founder's life cycle and both founders of RIM are past their peak entrepreneurial risk taking days.
There is your problem.
Where were the Board Director experts to point out this fact? As I have hammered in my blog, advisers and board directors appointed by the owners will never say what needs to be said. Have them appointed by an outsider and you will have a very different result.

January 23, 2012

Lessons from the recession for business owners


When I worked at a strategist for a bank and wrote the speeches for the CEO, who was also the founder, he would confuse me with his insistence on always bringing up complacency. As a young MBA with my career before me, I could not see wasting time on such a mundane topic which seemed more of a downer and something your mother would say. 

As I look back, I realize he was wise with his observation that success brings complacency and complacency brings failure.

Lesson from the recession: Run your company during boom times as if times were lean.

We have heard many leaders bemoaning that their companies would be far more successful if they had run them during the boom period as they are running them now. Without question, success can bring complacency. However, the best leaders we know resist this tendency. Their companies’ cultures foster continuous improvement and cost-reduction regardless of great performance.

Similarly, the advice we often give entrepreneurial and family business owners is, “Run your company as if you are preparing to sell it in three years.” This means eliminating under performing employees (which can be difficult, even when done with great care and consideration, but is critical), and building cost-cutting and improvement initiatives. These efforts will grow EBITDA and result in a more successful, resilient and valuable company.

As for my old boss, his bank is still in business, having survived the derivatives madness, and has achieved its vision to be global. 
Complacency is indeed the key word to put in all your leadership speeches.

January 19, 2012

Barry McKenna on how Canada can be competitive

How to get the Canadian economy to grow is on everyone's priority list. There were 65 recommendations made by Red Wilson's panel set up to make recommendations.
My time in private equity has shown me that "Growth and innovation" is an attitude.
Canadian business owners have managed to tuck in behind the American economy and grab a good enough market share, but not build its own global winning companies.
Here is an excellent article by Barry McKenna in the Globe and Mail discussing the problem on business innovation further:

Putting Canada on a more competitive footing will likely mean diversifying trade links beyond the U.S., converting corporate profits into world-beating innovation and pursuing big infrastructure projects. It also means welcoming more foreign investment from places such as China and the Middle East and deregulating a host of stodgy pre-Internet industries, such as telecommunications, cable and transportation.Such a campaign has a long way to go – as is highlighted by the comments of foreign investors like Naguib Sawiris, the Egyptian telecommunications tycoon. It was his money, controversially, that helped fund the startup of Wind Mobile in this country. In an interview with The Globe and Mail this week, he blamed Ottawa’s telecommunications policy for making it harder for new wireless companies to establish themselves. “Anybody who asks me, I tell him look, we are the stupid investors that poured a billion dollars into Canada here and created 1,000 new jobs, please don’t do this mistake. Don’t come here,” Mr. Sawiris said. He also drew a direct link between the long-standing federal policy of limiting foreign investment and the lack of global presence of Canada’s major telcos.
“If they were that good, why are they just in Canada here? Why don’t we have Rogers in the U.K. or Germany? Why is Vodafone everywhere? Why is France Télécom everywhere? And this national champion Rogers is only in Canada? Because only in Canada it gets pampered and it can kill its competitors.”
A push for reform
In 2008, an expert panel set up by the Harper government to examine Canada’s competitiveness recommended a major shift in Ottawa’s approach to telecom, in favour of opening it up to far more foreign investment. Three and half years later, the chairman of that panel, Red Wilson, looks back on his effort with a mixture of pride and regret. Pride because his panel’s findings are just as relevant today as they were then. But it’s tinged with disappointment because most of the 65 recommendations, including the one on foreign ownership of telecom companies, remain on the shelf even as the country’s innovation and productivity performance sputters.

January 18, 2012

Can I sell my company even if it is not profitable?

The question of the week is one asked by many of my clients:


Can I sell my company even if I have not made any profit the last couple of years?


The answer I give is a whole-hearted, "Yes!" 

You can always sell your company. The correct question though is: Will you receive a value sufficient to satisfy your personal objectives? 

Many of my clients have become used to withdrawing capital from the company and once profits erode, become nervous and think that they need to sell before profits decline further. This is where valuation and sale of your business by a professional EMD or corporate finance expert will make a significant difference. 

Although your historical EBITDA certainly is a factor, the value will depend largely on what EBITDA you can prove for the future. If, for example, you have landed large new contracts, you likely will be able to get value for most of the EBITDA that those contracts will generate over the years to come. 

I suppose the tougher question here is: Why are you selling your company now? If you have no choice, then you should prepare the best you can, potentially hire a broker  or Exempt Market Dealer to help you tell the story, and get the best value possible. 

If you don’t have to sell now and you think the future looks better, you likely will get more value if you wait. Taking on 30% sale to Private Equity would be your best option. They will fill up the tank again, revitalize your strategy and get you looking at what options you have - most often, hiring a CEO and encouraging you to do the work you love to do.



Jacoline Loewen is a Director of Loewen & Partners Inc., an Exempt Market Dealer, specializing in finance for owner operators and family businesses, specifically acquisitions, restructurings, sales, successions, strategy and private equity financing.
Jacoline began her career with Granduc Mines, Northern BC, and then Deloitte in their strategy unit. She developed a strategic planning model and published it in a book called "The Power of Strategy”. She also wrote "Business e-Volution" and “Money Magnet: How to Attract Investors to Your Business” (Wiley), which has been used by Ivey as a text book.
She is a Director on the Board of the Exempt Market Dealers Association (EMDA) responsible for brand and communications. She is on the advisory board of DCL International, Bilingo China and Flint Business Acceleration. She has been a Director for other Boards such as the Strategic Leadership Forum.
She is a regular panellist on BNN: The Pitch, a contributor to the Globe & Mail and National Post, serves as a judge for the UBC and the Richard Ivey School of Business’ Business Plan Competitions and is a guest lecturer at Ivey and Rotman Universities. Jacoline holds an arts degree in Industrial Relations from McGill University and a MBA from the University of the Witwatersrand.  Her MBA thesis was selected by Cambridge University and published by Cambridge’s Engineering faculty. 

January 16, 2012

Jacoline Loewen on 3 Rules for every Start Up - BNN The Pitch

Putting more into production of the The Pitch by pre-taping, rather than doing it live. We start today.
Up first to pitch are two start-ups that look promising for the financial returns and interesting, compelling products that they are already selling.
I will tell you their names later this week and give you a heads up on how they did with the private equity panel on BNN.
I thought I would add the 3 rules I liked the most from a great list by Mark Evens in The Globe and Mail on 10 rules for start ups. Here's Mark:


8. Understand that raising money is time-consuming and disruptive
From the outside looking in, raising venture capital looks sexy and exciting. The reality is that it involves a lot of grunt work, energy, numerous meetings and lots of patience to convince investors to commit. It also takes entrepreneurs away from running the business.
9. Recognize that once you raise money, it and your investors need to be managed
When investors decide to give startups money, they expect progress, traction and regular updates on what is happening. It’s not like they hand over the cash and then go away while the entrepreneur gets to do what he or she wants. Instead, startups need to continually manage their investors, which takes time and effort.
10. Enjoy the work because startups can be a 7/24 activity
Startups are not a 9-to-5 job that lets you go home at the end of the day without any work distractions. Startups are beasts that can be consuming so you had better enjoy the journey.

Jacoline Loewen on Professional services treating companies as an annuity

Most business owners and senior leaders build a relationship of trust with their service providers. The bulk of these relationships, generally, are the outsourced activities of accounting and legal work performed by accounting experts and lawyers.
When Private Equity partners are making an investment, it is my experience that they appreciate and respect those relationships.
One warning to family business owners, particularly those approaching the age of 50 who need to begin succession plans, your accountant and lawyer may not want to start any conversations that may change their circumstances. It pays for them to keep the Status Quo, the river flowing along the same route, so to speak, even if it is at a detrimental cost to the owner.
From years of observing the familiar level of complacency with lawyers and accounting firms, I often ask the same question, "Are you out for what's in it for you or for what's in it for the business owner?" As Adam Smith will attest, humans do go for the "What's in it for me?"
Getting an owner to change their goals for growth, for example, is just too risky. Getting a family business owner to contemplate a CEO other than themselves is just plain suicide.
As a business owner, understand this human fear of upsetting the person who is paying the bills and who could fire the lawyer or accountant from a nice, regular source of income.
Watch for complacency in your law and accounting service providers.
Often, the mere introduction of a competitive scenario from the introduction of Private Equity partners on the board, will yield better service at the same or even reduced cost. This is most often true with auditors, senior lenders and insurance and benefit providers.
Providing services should not be an evergreen annuity for the service provider. Yet it is too often the case.