How To Finance & Acquire An Existing Company : Business Acquistion 101!

Looking For Acquisition Financing ? Try This

OVERVIEW – Information on how buyers can acquire a company . The ability to successfully finance a business acquisition is key to winning when buying a company or merging your business into one

Acquire a company ? That’s one way to beat the ‘organic growth ‘path to business success and it can be a proven strategy ... when done properly. How then does the owner/entrepreneur successfully finance a business acquisition? Some experience in the area helps - given that difference sources of finance in this area demand different approval criteria. Let's dig in.

When buying / acquiring a business, or merging your business into another (That’s the 'M ' in m&a) it’s important to visualize the ultimate structure of the company. While it's preferable that your target business has little or no debt, strong cash flow, and valuable assets the reality is that's not always going to be the case. Therefore different types of financing are required to shore up the overall ' business valuation’

As we have said in the past, financial statements don't provide a ' magic number '

for value, but properly completed (and available) they should show you the cash flow situation of the business. Again, the past is not the future, so careful examination of future financial potential is key.

Buyers must also determine if they are buying the ' shares' of the business, or the ' assets'. There's a big difference in tax obligations here and this is where it's best to consult your lawyer or external accountant. Sellers need to take into consideration the fact that there is no real ' market ' for private company shares. The buying and selling of businesses relies then on proven ' formulas' for valuing a business.

Those valuations typically include giving a multiple to cash flow, profits, sales, or some combination of those. In some cases it's all about the ' assets ' of the business, so both a buyer and seller would benefit from a third party independent appraisal. While sellers will maintain an overall ' glossy ' outlook on assets.... it's buyer beware when it comes to sellers risk. Example: Specialized assets

The quality of the financials and the performance of the business historically dictate what type of financing you will need to complete a transaction. Poor profits, high levels of debt, and other operational deficiencies will dictate finance solutions. Ultimately understanding the working capital and assets are key. Remember also that in the small to medium enterprise area ' GOODWILL ' is rarely if ever financeable.

Oh and by the way the ability to ' sell yourself ' as a manager with skills is key.

Let's get back to our actual finance solutions. They include:

Canadian chartered banks

The Govt of Canada guaranteed ' Small Business Loan'

Asset based loans and lines of credit

Sale leaseback strategies on owned assets


Unsecured cash flow term loans

Seller financing participation - i.e. the 'VTB'

Buyer equity

While larger deals might be able to secure private equity or a public listing for financial success the real meat and bones of the small to mid market area of acquisitions relies on those 7 strategies ( or combinations of them ) that we highlighted above.

If you're looking for expert help and real world financial solutions to buying a business seek out and speak to a trusted, credible and experienced Canadian business Financing Advisor with a track record of success who can assist you in your business acquisition finance needs.


Stan Prokop - founder of 7 Park Avenue Financial –

http://www.7parkavenuefinancial.com

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 = CANADIAN BUSINESS ACQUISITION FINANCING EXPERTISE



7 Park Avenue Financial
South Sheridan Executive Centre
2910 South Sheridan Way
Suite 301
Oakville, Ontario
L6J 7J8


Direct Line = 416 319 5769

Office = 905 829 2653

Fax = 905 829 2653

Email = sprokop@7parkavenuefinancial.com

' Canadian Business Financing with the intelligent use of experience '

ABOUT THE AUTHOR
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