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Acquisition Finance For Success – The Why And How
Information on acquisition financing in Canada . Consider a business loan via ABL finance to successfully complete your transaction with no money down ? !
Why do companies want to acquire each other ? Of course it's for a variety of reasons, including growing sales, becoming a market leader in their niche, cost reduction, or buying the ' secret sauce' technology of another firm.
We're always on the look for some new thoughts in Canadian business financing , so we were drawn to an article in one of the two leading Canadian business newspapers the other day which had the catchy title of buying a company with ' no money down. The article was written by one of Canada's respected investment officers and fund managers.
No money down? And acquire a significant business at the same time. We were intrigued. The essence of the article was that many ' bargains ' are available in Canadian business - it’s a question of finding them! The article went on to say that the essence of such a search, once you have found a target firm, is to go back 50 years. Go back 50 years ? !Actually what the author meant was that at this point in your search it's time to call on Benjamin Graham , acknowledged as the father of value investing by almost all, including his prize teach pet student Warren Buffet .
What's recommended by these ' guru's is to look at ‘ net working capital ‘ - something we focus on a lot in our own preachings. That figure is made up of receivables, inventories and any cash on hand.
What about the other assets though? Essentially it's offered up that they don't mater. We think they do, but Mr. Graham and Buffett actually disagree with us .. the nerve!
So this is where we come in. Where the author of the article focuses on dealing with Canadian chartered banks we prefer a faster better route, ABL finance.
The beauty of ABL financing, via an asset based line of credit is that it can also include the fixed assets that seemed to have been discounted by Mr. Graham and Mr. Buffett.
A true asset based line of credit encompasses our previously mentioned current asset accounts, as well as unencumbered fixed assets. And while the article we referenced focused on bank financing the reality is that an acquisition financing via ABL finance provides a higher margin level on these assets. Typically those margins are 90% of receivables, significant inventory advances subject to appraisal / valuation, and financing for liquidation value of fixed assets.
More often than not firms in the SME sector that want to buy another business can generate no interest in Canada from ' private equity ' or ' VC' firms, as those firms focus on larger transactions.
So, no money down? The jury might still be out on that one, but we do assure clients that an ABL loan is a great financing alternative when you are looking to purchase another firm for competitive reasons.
Speak to a trusted, credible and experienced Canadian business financing advisor when you want to further your acquisition finance objectives.
South Sheridan Executive Centre
2910 South Sheridan Way
Suite 301
Oakville, Ontario
L6J 7J8
Office = 905 829 2653
Click here for 7 PARK AVENUE FINANCIAL
http://www.7parkavenuefinancial.com
Business financing for Canadian Firms , specializing in working capital, cash flow, asset based financing , Equipment Leasing , franchise finance and Cdn. Tax Credit Finance . Founded 2004 - Completed in excess of 100 Million $ of financing for Canadian corporations .
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
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