Business Acquisition Loan Success Factors

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Afraid to Ask Questions About Business Acquisition Financing ?

Business acquisition financing in Canada. When you are looking for a funder for a merger or acquisition of another company  or if you're acquiring a business,  remember something we heard the other day -  ' Genius is often just pointing out the obvious truth that no one else sees.'

 

So when we recently talked about some critical aspects, you should not overlook this type of financing challenge we remembered ... ' Wait  ... there's more!”

 

It's critical when buying a  business to ensure you understand that both yourself and the other firm have somewhat separate agendas. No question on that one!  Simply speaking, it’s important to step outside those agendas, look inside, and ensure you have the right evidence on assets, cash flow, and valuation.

 

  

WHY DO ACQUISITIONS SOMETIMES NOT HAPPEN?  

 

Experts in the field say that trends now show that while there seem to be many businesses available for purchasing and financing, many deals fade into oblivion on a target company. A lot of reasons might exist for that fact when it comes to how to finance an acquisition - Some of them might be:

 

Poor objectives of buyer and seller

Inadequate financing knowledge of a proper financing structure

 

As an acquirer, it’s important not to underestimate your capacity to value and finance a deal, as tough as it might seem to admit that.

 

IT'S ALL ABOUT ASSETS, CASH FLOWS, DEBT!

 

Many purchasers and sellers have a huge challenge in assessing existing and future debt issues in your deal. Aside from organic growth, the synergy of a merger or acquisition of an existing business has tremendous appeal in the company's growth of products and services.

Financing is often about the amount of debt that is in fact existing or planned and does not necessarily make or break a deal. Most experts seem to say that it’s all about two things in mergers and acquisitions  - hard assets and cash flows. And by the way, that’s future cash flows that you can reasonably predict!

 

PRIVATE TRANSACTIONS HAVE NO PUBLIC LIQUIDITY, AS DO PUBLICLY LISTED COMPANIES

 

Remember that unless you're purchasing a public entity, which certainly doesn't happen a lot in the SME sector, the liquidity issue around all those assets and intangibles doesn't really exist.  So your challenge is, yes, to understand the value of assets and cash flows, but don’t forget those items such as intangibles!  Perceptions of clients and lenders for smaller firms are equally as important.

 

THE CASH FLOW MULTIPLE IS A COMMON VALUATION PRACTICE

 

There are, of course, some real basic methods to value your acquisition or merger and assess the financing needs. Businesses in the SME sector will typically be valued at a multiple of current cash flows. The time period in which you will be able to retire and pay back debt is also important.

 

Oh, by the way, don’t forget those skeletons in the closet! They might include existing financing and credit problems with banks and other lenders, bad publicity, upcoming industry issues, potential loss of major accounts, and overvalued assets.

 

5 METHODS OF SUCCESSFULLY COMPLETING ACQUISITION  FINANCE / TAKEOVER / OR BUYOUT

 

You do have the financing tools available to make the ' right ' acquisition. They include-

 

Government business loan - The ‘SBL.’ =  SBL loans will cover acquisitions up to a loan amount of 350,000. Interest rates are very competitive, and repayment is typically over a 2-5 year period, so well-planned SME/SMB transactions should safely cover loan expenses and financing costs.

The federal government guarantee on the program provides a guarantee and safety measures for Canadian banks who in turn can now lend money on acquisitions that might otherwise not meet bank criteria - For qualification under the Canada Small Business Financing Program, talk to 7 Park Avenue Financial.

 

Down payments/ owner equity range from 10-40% for acquisitions when using this program. However, the borrower must meet the SBL  requirements on the size of the business ( revenues must be under 10 Million dollars ), which includes limits on net worth, income and credit score, and overall loan size regarding the 350k cap.

Many borrowers avoid the program due to the 'paperwork' and application process, including the need for a business plan. 7 Park Avenue Financial prepares business plans for our clients that meet and exceed bank and other commercial lender requirements.

 

Asset Based Lending - ' ABL' lending focuses on the balance sheet and the  concept of a leveraged buyout - funding for accounts receivable, inventories and fixed assets and real estate

 

Bridge Loans

 

Cash Flow loans / Mezzanine financing -

Mezzanine loans are cash flow loans that are often termed  ' the middle  ' of debt and equity financing - Cash flow is the collateral for the loan, and typically no other collateral is required for a mezzanine loan - This financing typically ranks behind a senior lender. It can be a key component of a final business purchase financing.

 

Bank term loans/lines of credit - Most banks, even those dealing with SMEs, have specific provisions put aside for financing an acquisition, including the government loan program. With interest rates remaining historically low, it is still a good time to avail of a bank option when the price for your transaction is substantial.

 

Canadian banks will often provide the best terms: aware that your business prospects are looking positive, they’ll be keen to keep your business in-house in a current relationship. It goes without saying that this is an angle that you should leverage when looking for a bank loan for a business acquisition if your transaction meets bank credit quality.

Banks look for strong management and a personal commitment to the business.

 

A term loan structure is typically the standard bank acquisition financing financial structure- complemented by a lien of credit to augment the purchase. Ongoing and future equipment needs can be achieved via leasing or business equipment loans from the bank or third-party lessor/lender.

 

Seller Financing -  Owner financing is another method to fund an acquisition deal. Also known as  "seller finance," it can add greatly to the creativity around a deal structure. Offering equity to the owner/owners of a target firm to finance a business acquisition can be one way of smoothing the process.

This would involve giving them some equity in the newly merged firm. If that is undesirable for various reasons, creative strategies around a seller note/vendor take-back of debt need to be taken on in your transaction - minimizing the funds that need to be borrowed.

The combination of reduced costs and potential flexibility on deal terms helps minimize funding from a bank or third-party commercial lender.

Many buyers often forget to assess the ongoing operational costs of the business, which may include needs, for example, for new staff, technology, the infrastructure around operations, etc. Purchasers who forget to take into account these points are at risk for the future success of the transaction.

 

 

 

CONCLUSION - BUSINESS ACQUISITIONS IN CANADA

 

While many entrepreneurs explore private equity or venture capital, these 2 types of solutions are only applicable to the smallest percentage of transactions for an acquisition loan and typically not in the SME sector of the economy. The acquisition process and interest rates will also vary dramatically based on the size and complexity of your transaction.

 

Favourable low rates in the current Canadian economy make rates for acquisitions easier to achieve and assist in letting a company reach new economies of scale, allow for an increase in the size of the company's operations and sales revenues.

 

Hopefully, we have pointed out some of those ' obvious ' truths that will make your small business acquisition and financing more successful. Seek out and speak to a trusted, credible and experienced Canadian business financing advisor with a track record of business finance success who can assist you with your business acquisition financing and funding needs.

 

Let's get started on acquisition loans and solutions and resources to make your acquisition deal work.

 

  

FAQ: FREQUENTLY ASKED QUESTIONS  

 

What Is Acquisition Financing? 

Acquisition financing allows users to meet their current acquisition aspirations by providing immediate resources that can be applied to the transaction. Acquisition financing is the capital that is obtained to buy another business. A business acquisition loan helps entrepreneurs acquire an existing business, franchise,  or buy out a partner or owner.

 

 

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

Direct Line = 416 319 5769

Email = sprokop@7parkavenuefinancial.com

http://www.7parkavenuefinancial.com

Click Here For 7 PARK AVENUE FINANCIAL website !



7 Park Avenue Financial provides value-added financing consultation for small and medium-sized businesses in the areas of cash flow, working capital, and debt financing.



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.

' 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. He is an experienced

business financing consultant

.

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 financing 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.


Click here for the business finance track record of 7 Park Avenue Financial





Stan Prokop
7 Park Avenue Financial/Copyright/2021

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Business Acquisition Financing Funding Merger | 7 Park Avenue Financial

Lawyers Guns And Money : Acquisition And Merger Financing And Business Lending In Canada

Buying and Financing A Business In Canada

Information on business lending strategies and solutions for merger and acquisition financing

Acquisition financing in Canada. Lawyers, Guns and Money?! Do we really need all three of those? Of course not, in fact Money and probably some measure of ' lawyers' should do.



Warren Zevon's rock classic of the same name ‘... send lawyers guns and money ‘didnt include unfortunately any merger busines lending advice for business owners and managers in the SME sector who contemplate properly completing an M&A transaction.



Let's examine some key strategies and tips around your consideration of an acquisition financing
or merger. There are different reasons for buying a business, and at the same time numerous financial strategies exist to achieve the final goal. Proper merger and acquisition financing compliments the final exit strategy of both the founders of the firm being acquired, as well as for the owners of the newly created firm .



Today we're talking mostly about what's known as the ' forward merger' wherein your company survives by acquiring the other.



To say you need a team of experts in a successful transaction is a major understatement. That team will allow you to properly position both companies and ensuring proper valuations are in place prior to and post M&A.



Its human nature for buyers to bid low and sellers to ask high, so solid analysis of current financing structures is critical.



Leverage is a key concept in pre merger and acquisition financing analysis. And we're talking two kinds of leverage - both financial and operating g. Transactions often don’t make sense if the financial leverage is more than 3:1 from a debt to equity perspective, and the operating leverage analysis includes fixed and variable cost analysis.



The amount of leverage you will ultimately have will often determine what type of financing and what lender will successfully complete your deal.



The concept of ' friendly debt ‘, which can be a vendor take back is a great place to focus , and transaction that include a healthy ' VTB' are generally viewed as favorable . Of course if your lender for the acquisition financing considers the VTB as pure debt that's a different story.



But, as we said, generally speaking a solid VTB component of your transaction leads to a good deal. It's a great way of buying a business, especially if you view the financing of the transaction as a challenge. The reality is that a solid VTV plus the potential for profit in a business has the makings of a solid M&A deal. Quite often of course the VTB structure is much more favorable than traditional bank or commercial finance firm debt, and it gives all parties a reason to succeed, even the seller holding the VTB.



A solid down payment of equity in your own current business, proper M&A financing, and a solid VTB from the current owner or owners simply make for a probably successful acquisition financing win.



There are numerous financial considerations and analysis required for a solid M&A deal that represents a win/ win. They include our previously mentioned debt to equity, as well as other concepts such as cash flow servicing.



In the end result the amount of debt you take on in a merger via a business lending vehicle can make your firm more conservative in nature as you're focused more on servicing the debt than focusing on new opportunities



Talk about some complex scenario - identifying the opportunity, value and pricing your target, and, oh yes financing via a proper business lending strategy. So, as our friend Warren Zevon sang ' send ' lawyers, guns and money ‘, but our recommendation is to focus on # 3 - Money for your merger and acquisition financing in Canada.

Speak to a trusted, credible and experienced Canadian business financing advisor for assistance on your SME M&A financing needs

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

Email = sprokop@7parkavenuefinancial.com

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 .



' 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

Business Financing ? Looking To Close A Deal in Acquisition Or Merger Finance In The SME Sector .How An Advisor Get’s You There!

Going It Alone In Business Financing Or Acquisition Finance?


OVERVIEW – .Information on the value and benefit of a business financing advisor when completing a merger or acquisition finance transaction in the SME sector in Canada



Business financing in Canada. Going it alone has its benefits in business and life, but not necessarily so when you don't have the assistance and expertise to complete the financing you need, forge an acquisition, or complete a merger of sorts. That’s when a (good) advisor or intermediary is worth their weight in gold. And he who has the gold...!

The goal seems clear at the start - make an intelligent decision on purchasing or merger with a target, achieving via negotiation the right price, and then completing financing as needed.

Part of the challenge is that top experts agree that the SME sector in Canada that the huge ‘small to medium enterprise’ segment comprising of hundreds of thousands of firms is somewhat under serviced. Bigger and or public companies tend to have all the advisors and assistance they need , but the Canadian business owner or manager looking for reasonably priced but expert assistance is somewhat under served.

It's apparently a free country though, and you can go it alone but that seems mostly driven by a distrust of sorts of the type of expert advice that is out there, and at what cost.

So how can the right intermediary or advisor help? It boils down to several key areas that include helping you validate criteria, putting and analyzing the proper information together, putting forth a deal structure that works, and finalizing the finances you need . So by now it hopefully seems clear that an expert, that ' expertise ' is key to picking someone to work with you.

A good way to do that is ask for the Track Record

of transactions closed and completed, along with the type. That record of success will hopefully reflect size of deals completed, a reputation of professionalism and confidentiality, and the ability to interact successfully and professionally with everyone involved in your deal or financing.

Certain advisors or intermediaries might request ' exclusivity ' on the deal. That's certainly ok and happens a lot; we're personally in favor of people getting paid for tangible results - end of story.


The issue of fees /overall compensation/ work fee- retainer becomes a stumbling block for all parties on occasion, understandably so. What can you do to address these sorts of points? Numerous structures are available to ensure both everyone feels comfortable with who they are dealing with and how success will be measured. That might come in the form of a one time all inclusive Success fee, or combinations of an initial work fee/retainer, or in some cases a monthly retainer, the latter being our own least favorite.

The issues around overall price and value of the compensation of an advisor or intermediary really boils down into several categories.

They include:

Time spent on any transaction

The level of overall commitment to a deal or financing

The overall risk and reward of getting a deal or financing done, or not done!

The concept of ‘incentive ‘as well as the useful information, advice, etc that can be brought to any deal.

Ideally you want to be working with someone who either is or can be working on a first name basis with key players on your transaction. Reputation, specialization, and experience of course create a clear message that a successful deal or financing can be completed in the most efficient time possible.

Key areas of focus should be:

Financing contacts and reputation / negotiation skills/ unbiased advice that is not self serving/ setting reasonable expectations and no conflicts of interest. Also key is the ability to evaluate and present the financials on any deal in a positive manner.

As you can imagine a lot of time can be spent on ‘financing ‘that was never really meant to be. The ability to source and present financing that’s real and available is key. Along the way the intermediary or advisor should provide some strong level of financial/cash flow analysis, etc.

So at the end of the day consider that real value of an advisor or intermediary is the time and experience to get a deal done or on track – the right combo of compensation and success. Seek out and speak to a trusted, credible and experienced Canadian business financing advisor to assist you with your financing, acquisition or merger 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 - has completed in excess of 80 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 re: Canadian business Financing & contact details :


http://www.7parkavenuefinancial.com/business-financing-acquisition-merger-finance.html







Stan Prokop

Some Obvious Truth Around Business Acquisition Financing . 2 ( Other ) Things You Never Should Forget When Funding A Acquisition / Merger

Avoiding Skeletons In the Closet In Business Finance

OVERVIEW – Information on business acquisition financing in Canada. Funding your merger and acquisition requires not overlooking … the obvious!


Business acquisition financing in Canada. When you are looking for funder for a merger or if you're acquiring a firm remember something we heard the other day - ' Genius is often just pointing out the obvious truth that no one else sees'.

So when we recently talked about some critical aspects you may should not overlook with this type of financing challenge we remembered ... ' Wait ... there's more!”

It's critical in such an exercise to ensure you understand that both yourself and the other firm have somewhat separate agenda's. No question on that one! Simply speaking, it’s important to step outside those agendas, look inside, and ensure you have the right evidence on assets, cash flow, and valuation.

Experts in the field say that trends now show that while there seems to be a lot of businesses available for purchasing and financing many deals simply fade into oblivion. A lot of reasons might exist for that fact- one of them might simply be poor objectives, inadequate financing knowledge. As an acquirer it’s important not to underestimate your capacity to value and finance a deal, as tough as it might seem to admit that.

Many purchasers and sellers have a huge challenge in assessing the issues of existing and future debt in your deal. The amount of debt that is in fact existing, or planned does not necessarily make or break a deal, most experts seem to say that it’s all about two things - hard assets, and cash flows. And by the ways that’s future cash flows that you can reasonably predict!

Remember also that unless you're purchasing a public entity, which certainly doesn't happen a lot in the SME sector the liquidity issue around all those assets and intangibles doesn't really exist. So your challenge is, yes, to understand the value of assets and cash flows, but don’t forget those items such as intangibles! Perceptions of clients and lenders for smaller firms are equally as important.

There are of course some real basic methods to value your acquisition or merger and assess the financing needs. Businesses in the SME sector will typically be valued at a multiple of current cash flows. The time period in which you will be able to retire and pay back debt is also important.

Oh, by the way, don’t forget those skeletons in the closet!

They might include existing financing and credit problems with banks and other lenders, bad publicity, upcoming industry issues, potential loss of major accounts, and overvalued assets.

You do have the financing tools available, to make the ' right ' acquisition. They include-

Government business loan - The ‘SBL’
Asset Based Lending
Bridge Loans
Cash Flow loans
Bank term loans

Hopefully we have pointed out some of those ' obvious ' truths that will make you acquisition and financing more successful. Seek out and speak to a trusted, credible and experienced Canadian business financing advisor who can assist you with your business acquisition financing and funding needs.

7 PARK AVENUE FINANCIAL
CANADIAN BUSINESS FINANCING EXPERTISE


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 7 years - has completed in excess of 80 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 re: Canadian business financing & contact details :

http://www.7parkavenuefinancial.com/business-acquisition-financing-funding-merger.html




7 Park Avenue Financial
South Sheridan Executive Centre
2910 South Sheridan Way
Suite 301
Oakville, Ontario
L6J 7J8
Phone = 905 829 2653
Fax = 905 829 2653

The Right Business Financing For A Company Purchase, Merger, Or Acquisition. Small , or Large .. Here’s What You Need To Know

Canadian Business Financing


OVERVIEW – Information on the proper business financing mechanism based on a company purchase, merger , or acquisition in Canada .



Admit it. You've thought about it. Actually we probably all have. Just imagine a company purchase of a legendary Canadian tech company, or a merger or acquisition with your firm of one of Canada's iconic firms who perhaps has fallen on dire straits.

Here's the reality though that might surprise you. Whether you have focused on a Canadian major corporation purchase, or at the other end of the spectrum a local pizza joint the key issues are probably still the same. ( It's just that the lawyers and accountants will cost you a bit more!) What is the value of the business, and how do you finance it. And when you think about it even a great company that you over pay for can be financially disappointing.

The good news is that there are numerous ways to value a company, and there is an even more proper way to match the financing of that purchase with the appropriate business financing.

When it comes to purchasing a business it’s about laying down the odds on future cash flows. The other reality of course is if you, or your firm are suited to buy this business , vis a vis experience, mgmt, etc.

The challenge of buying a business in the SME (small to medium enterprise) sector is in some ways more dangerous than your purchase of a Canadian iconic brand, failing or otherwise. That’s because when it’s a larger corporation it allows you to bring in the usual army of accountants, investment advisors, business valuators, consultants (heaven forbid!)... Etc.

Typically the financing of a firm is based on your valuation method, which might be an asset based transaction, a cash flow transaction, or an equity transaction.

The challenge of financing an equity transaction is significant. That's because they are hard to finance because there is no liquidity exit for the lender. Case in point - we recently met and spoke with a 40% owner in what could be considered a major Canadian corporation. While the equity is worth millions of dollars financing of that equity is in fact as close to impossible as one could get.

Asset based financing is much easier to achieve. But, don't forget that if you mis - value those accounts receivable, inventories, and equipment you might find that there is a lot of tuition to be paid in the school of book value! In fairness sometimes the true asset value of a transaction far exceeds book value - that’s a good thing if you have focused on an asset based lending solution.

Goodwill, like equity, is very hard to finance, enough said... so your ability to value and understand intangibles is critical.

But also don't forget that when it comes to asset finance for a business financing merger, acquisition, company purchase, etc that you need to have a strong hand on market and replacement values.

While public and very large corporations continually have multiples of earnings based performance that is much more difficult for a smaller or private firm. Frankly those earnings often have to be normalized, which usually means having to take the kids and grandma off the payroll.

At the end of the day it’s about financing assets, cash flows, and profits with a finance mechanism that is appropriate.

Seek out and speak to a trusted, credible and experienced Canadian business financing advisor who can match financing and business acquisition goals in the right manner.

7 PARK AVENUE FINANCIAL
CANADIAN BUSINESS FINANCING



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 7 years - has completed in excess of 80 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 re: Canadian business financing & contact details :

http://www.7parkavenuefinancial.com/business_financing_merger_acquisition_company.html

Lawyers Guns And Money . Acquisition And Merger Financing And Business Lending In Canada

Buying and Financing A Business In Canada


Information on business lending strategies and solutions for merger and acquisition financing




Acquisition financing in Canada. Lawyers, Guns and Money?! Do we really need all three of those? Of course not, in fact Money and probably some measure of ' lawyers' should do.

Warren Zevon's rock classic of the same name ‘... send lawyers guns and money ‘didnt include unfortunately any merger busines lending advice for business owners and managers in the SME sector who contemplate properly completing an M&A transaction.

Let's examine some key strategies and tips around your consideration of an acquisition financing or merger. There are different reasons for buying a business, and at the same time numerous financial strategies exist to achieve the final goal. Proper merger and acquisition financing compliments the final exit strategy of both the founders of the firm being acquired, as well as for the owners of the newly created firm .

Today we're talking mostly about what's known as the ' forward merger' wherein your company survives by acquiring the other.

To say you need a team of experts in a successful transaction is a major understatement. That team will allow you to properly position both companies and ensuring proper valuations are in place prior to and post M&A.

Its human nature for buyers to bid low and sellers to ask high, so solid analysis of current financing structures is critical.

Leverage is a key concept in pre merger and acquisition financing analysis. And we're talking two kinds of leverage - both financial and operating g. Transactions often don’t make sense if the financial leverage is more than 3:1 from a debt to equity perspective, and the operating leverage analysis includes fixed and variable cost analysis.

The amount of leverage you will ultimately have will often determine what type of financing and what lender will successfully complete your deal.

The concept of ' friendly debt ‘, which can be a vendor take back is a great place to focus , and transaction that include a healthy ' VTB' are generally viewed as favorable . Of course if your lender for the acquisition financing considers the VTB as pure debt that's a different story.

But, as we said, generally speaking a solid VTB component of your transaction leads to a good deal. It's a great way of buying a business, especially if you view the financing of the transaction as a challenge. The reality is that a solid VTV plus the potential for profit in a business has the makings of a solid M&A deal. Quite often of course the VTB structure is much more favorable than traditional bank or commercial finance firm debt, and it gives all parties a reason to succeed, even the seller holding the VTB.

A solid down payment of equity in your own current business, proper M&A financing, and a solid VTB from the current owner or owners simply make for a probably successful acquisition financing win.

There are numerous financial considerations and analysis required for a solid M&A deal that represents a win/ win. They include our previously mentioned debt to equity, as well as other concepts such as cash flow servicing.

In the end result the amount of debt you take on in a merger via a business lending vehicle can make your firm more conservative in nature as you're focused more on servicing the debt than focusing on new opportunities

Talk about some complex scenario - identifying the opportunity, value and pricing your target, and, oh yes financing via a proper business lending strategy. So, as our friend Warren Zevon sang ' send ' lawyers, guns and money ‘, but our recommendation is to focus on # 3 - Money for your merger and acquisition financing in Canada.
Speak to a trusted, credible and experienced Canadian business financing advisor for assistance on your SME M&A financing needs




7 PARK AVENUE FINANCIAL
IS AN EXPERT IN ACQUISITION FINANCING



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 7 years - has completed in excess of 80 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 re: Canadian business financing & contact details :

http://www.7parkavenuefinancial.com/merger_acquisition_financing_business_lending.html