Newsletters

Buying a Business

Leveraged Buyouts

A leveraged buyout (LBO) is a method used to finance a business acquisition. Specifically, the buyer uses debt to purchase the equity of the business. This technique has been around since the early part of the 20th century but became popular in the 1980’s. By far the most famous and largest LBO at the time…

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Valuing Synergies in M&A

When a business owner considers growing through acquisitions, he should take the same approach as an individual investor would. “Think like an investor” should be his mantra. By the same token, a buyer should only consider purchasing a target if an overall benefit will accrue to the buyer’s shareholders that they wouldn’t be able to…

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Cross Border M&A

As technology improves, the world continues to become a smaller place to do business. Buying items online from a company in a different country that is thousands of miles away is no longer as risky a proposition as it once was. The same can be said for a business acquisition in another country. What was…

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Liquidity and Control in Valuing a Business

Most business owners and shareholders think they have a good idea of what their shareholdings are worth. Yet when it comes time to sell, many are surprised by the cutrate offers that are made. Most will chalk it up to negotiating tactics, in that no one wants to pay more for a target than they…

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Selling a Business

The Controlled Auction

There are a number of methods owners can use to sell their business. One of the most popular and attractive methods is the controlled auction. Advantages of the controlled auction include: 1. Price Discovery: it provides the seller knowledge of what potential buyers will pay for the business. 2. Competition: multiple offers from prospective buyers…

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Shareholder Agreements

In a scenario where an owner has sold a portion of the business to a third party, a key component of the sale would be the negotiation and signing of a unanimous shareholders’ agreement between the Owner and the Investor. This newsletter discusses some of the items the Owner should expect to see in a…

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How to Sell Your Business

In a recent newsletter, we discussed how an owner should prepare his business for sale. This newsletter discusses the next steps once the business is “sale ready” and the decision to sell has been made. Prior to selling, an owner should determine what his long term objectives are. Namely: 1. Is the owner prepared to…

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Preparing Your Business for Sale

In a previous newsletter, we discussed succession planning for small businesses and indicated that the ideal lead time to prepare for a sale to a successor is seven to 10 years. If there is no plan to sell to an insider, a strategy is still required to prepare the company for a sale to a…

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Financing Your Business

Special Loan Situations

In previous chapters, we touched on Special Loan situations with a company’s lender. Below we describe this in more detail and provide some insight on what to expect in these circumstances. This scenario normally occurs when a company’s performance is sub-optimal and it is in violation of one or more of its financial covenants. Cash…

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Financial Covenants in the Lending Agreement

“A bank is a place that will lend you money if you can prove that you don’t need it.” – Bob Hope Truer words have never been spoken. We often hear similar comments from prospective clients about the behaviour of lending institutions i.e. “banks don’t understand our business”; or “banks are never there when you…

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Mezzanine or Sub-Debt Financing

In this newsletter, we continue our recent theme of alternative sources of financing by discussing mezzanine or sub-debt financing. The main characteristics of this type of financing are as follows: 1. It will sit in second position behind a primary lender who will have a first right on all of the assets of the company…

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Venture Capital Investments

A private equity investment is usually defined as an equity investment in a privately owned company. There are two main types of private equity investments: 1. Venture Capital; and 2. Mezzanine and Buyout. This newsletter will focus on venture capital investments. Venture Capital (“VC”) investments are investments in young, immature, “high-growth potential” companies. From the…

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