Why Consider a Merger Or Acquisition?

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Mergers and Acquisitions , commonly called "M & A" in high finance parlance is one of the more exotic areas of finance and business.

Generally larger transactions in this area are handled by investment bankers or merchant banks, but everyday a number of small and medium size businesses either complete or contemplate such transactions.

Generally when a business owner or management team contemplates a merger or acquisition there is a strategy behind the transaction. Let's look at some of the reasons for considering such a transaction.

Many companies simply realize that there is business logic and a risk component to diversifying out of their core businesses. We all know that 'diversification' is preached in all areas of financing, including our personal financial strategies. Companies who merge or acquire other firms for diversification realize they are lowering overall business risk.

Many times there are some classic synergies that can make a transaction in the 'M & A' environment very appealing. If a firm has a strong brand and they can add additional products to that brand then and grow both profits and sales that becomes a viable transaction. A smaller firm might have more of a 'reputation' than a 'brand' of course.

In the current business and economic environment there are many undervalued or struggling companies. These businesses can be perhaps purchased at a bargain, and may in fact be worth many times their current valuation due to unique circumstances.

The other reason companies consider a merger specifically is the ability to lower costs while at the same time increasing revenue. That is simply a scenario in which many costs can be lowered in the overhead and operating expense departments. Or in some cases, say a manufacturing company, efficiencies can be realized. Unfortunately this sometimes comes at a 'human cost' as downsizing is common in this area of mergers and acquisitions.

In some cases an acquisition can simply be current management buying the company from the current owners. This is typically called an LBO, or 'leveraged buyout'. Management usually puts in some new equity into the company and in many circumstances assets are refinanced at the same time.

In summary the merger and acquisition area is a unique area of business financing. Business owners must have a solid rationale, as well as a strategy, for contemplating these types of transactions.

Stan Prokop is the founder of 7 Park Avenue Financial.

See http://www.7parkavenuefinancial.com
The company originates business financing for Canadian companies, and is a specialist in lease financing, working capital financing and asset based lending, and has completed a number of acquisition financing for their client base.


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





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

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




















Article Source: http://EzineArticles.com/expert/Stan_Prokop/432698


Article Source: http://EzineArticles.com/3598371

Inside Mergers And Acquisitions Success In Canada. It Starts With Business Valuation

Can Anything Replace Good Business Valuation When It Comes To Buying A Business In Canada


OVERVIEW – Information on business valuation in Canada. What makes a good deal when it comes to mergers and acquisitions financing ?





Successful mergers and acquisitions deal making in Canada, particularly in the SME sector (small to medium enterprises) often starts with good business valuation. It’s a bit of art and science quite frankly, and if you don't have an army of analysts of investment bankers

doing the work for you these tips and advice should help. Let's dig in.







The proper valuation of a business you are looking at buying or acquiring is often driven by the amount of captial you can either invest or raise financing for. While there are a number of ' rules of thumb' in business valuation nothing makes better sense than... you guessed it... common sense.

In hindsight buying a business or merging with one will seem like a good or
bad deal. Many clients we meet boast they have been able to purchase a business for a great price - with often the reason being poor sales and profitability that they hope of course to turn around.

Knowing the amount of cash you need to both acquire and run the business is critical - and if you're not supplying equity then its all about the right amount, and cost... of debt.

A good business in Canada, when acquired, can often be financed with bank debt. However our bankers and lenders need to clearly understand the nature of the business. Issues you will want to cover off are seasonality of cash flows, client profiles, revenue recognition and billing issues and the level of financial control that you can demonstrate in running the business.

Cash flow analysis is critical, if only for the simply reason that your bank and other lenders want to know how and when the will be paid back. Here's where a clean business plan and cash flow forecast matter most. The latter document should show clearly how debt will be covered, and how profits will be generated via asset turnover, etc.

If your transaction has a proposed high debt to equity ratio a non bank lender will often be required to complete the deal. This type of deal can be successfully consummated via a cash flow mezzanine type loan, or even a non bank asset based line of credit. This latter facility simply monetizes their assets to the maximum allows by your ABL asset based lender.

Very few deals in Canada when it comes to mergers and acquisitions can be accomplished without some level of personal guarantee

from the purchasers. What many business owners don’t realize when it comes to the ' PG ' is that they are often negotiable in size, and can be negotiated to be released based on certain ' pivot points' in the future.

Although generally rare it is possible in Canada to have one bank place less emphasis on the personal guarantors than another bank. One age old technique is to provide a resolution of your directors confirming PG's of owners aren't allowed. That forces a bank to consider the transaction on its own merits. Possible, but not probable as we have hinted.

At the end of the day it comes down really to 4 key issues you face when acquiring a business and financing the transaction:

The amount of internal capital you have and the external capital you need

Types of financing that will accommodate your transaction

Distinguishing between working capital needs and long term debt

Cash flow generation

Proper business valuation focuses on benchmarking the proposed deal within industry parameters, understand key operating ratios, and being able to put solid mgmt in place to close a deal and run a business.

For solid business valuation financing advice seek out and speak to a trusted, credible and experienced Canadian business financing advisor who can assist you with your financing needs when it comes to buying a business.



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 :

7 Park Avenue Financial = Mergers and Acquisitions Financing Expertise





Have A Question Or Comment On Our Blog Or Canadian Business Financing Alternatives ?


CONTACT:

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



Email = sprokop@7parkavenuefinancial.com

Stan Prokop