Tweet
Buying A Troubled ( Or Successful !) Company In Canada ? Finance Strategy 101
OVERVIEW - Information on buying a business in Canada . Numerous finance strategies and solutions exist for acquisition financing . Sources of capital are identified as well as understanding the differences between turnarounds and successful acquisitions
Acquiring an existing business in Canada. Talk About Temptation! We’re talking about buying an existing business that's already profitable, or, on the other hand a firm that is challenged and due for your turnaround. In both cases current owners might be motivated to sell, but for different reasons!
How do firms for sale get themselves in trouble? Often it's lack of funding and too much existing debt, as opposed to operating problems which are a whole different kettle of fish.
Some immediate issues to look into are arrangements with current lenders. This is often the scenario of working capital being extremely limited due to the current financing structure.
There are numerous ' valuation techniques ' in establishing the right price for the business. If a business is already losing money and has poor or negative cash flows it's time to take a hard look at the assets.
The good news about existing assets is there are numerous financing strategies to assist in finalizing a transaction these solutions include:
The Govt of Canada Guaranteed Small Business Loan (It finances assets and leaseholds and has a new maximum borrowing cap of $1,000,000.00
Sale Leasebacks
Asset based bridge loans and business credit lines
Naturally the quality of the assets is key, whether they are fixed ' hard' assets or the assets that represent working capital components - i.e. accounts receivable & inventories. Key point - book values don't tell the true value of the assets, and in some cases you might need to make an investment in new technology - i.e. computers / software, etc (Equipment Leasing is almost always the best way to acquire tech assets given their cash outflow flexibility)
Service companies that have few assets are always more challenging to finance given lack of hard assets.
While new owners will almost always be required to put some of their own cash into the business many financing solutions will also drive the minimum and maximum amount they will need to put up. Asset based lending strategies will often help minimize owner equity investment.
While Canadian chartered banks are a great source of financing for acquiring existing profitable businesses they are somewhat more than reluctant to finance firms with obvious financial challenges. Banks will almost always focus on a business plan, mgmt experience, the balance sheet and owner personal financial statements.
The bottom line? When buying an existing profitable or challenged business have a strong understanding of your opening balance sheet and the proper mix of current assets and debt. Understand the value of your hard assets and ensure you have financing in place to cover working capital needs.
Stan Prokop - founder of 7 Park Avenue Financial –
Originating business financing for Canadian companies , specializing in working capital, cash flow, asset based financing . In business 10 years - Completed in excess of 100 Million $$ of financing for Canadian corporations . Core competancies include receivables financing, asset based lending, working capital, equipment finance, franchise finance and tax credit financing. Info & Contact Details :
7 Park Avenue Financial
South Sheridan Executive Centre
2910 South Sheridan Way
Suite 301
Oakville, Ontario
L6J 7J8
Office = 905 829 2653
' Canadian Business Financing with the intelligent use of experience '
Stan has had a successful career with some of the world’s largest and most successful corporations.
Prior to founding 7 Park Avenue Financial in 2004 his employers over the last 25 years were, ASHLAND OIL, ( 1977-1980) DIGITAL EQUIPMENT CORPORATION, ( 1980-1990) ) CABLE & WIRELESS PLC,( 1991 -1993) ) AND HEWLETT PACKARD ( 1994-2004 ) He is an expert in Canadian Business Financing.
Stan has over 40 years of business and finance executive experience. He has been recognized as a credit/financial executive for three of the largest technology companies in the world; Hewlett-Packard, Digital Equipment and Cable & Wireless. Stan has had in depth, hands on experience in assessing and evaluating thousands of companies that are seeking financing and expansion. He has been instrumental in helping many companies progress through every phase of financing, mergers & acquisitions, sales and marketing and human resources. Stan has worked with startups and public corporations and has many times established the financial wherewithal of organizations before approving millions of dollars of financing facilities and instruments on behalf of his employers.
Stan Prokop
No comments:
Post a Comment
Note: Only a member of this blog may post a comment.