Smart Ways To Finance A Business Purchase Or Management Buyout

OVERVIEW – Information on business purchase finance in Canada. Acquisition takeover financing for SME companies in the Canadian marketplace


Business purchase finance
in Canada often requires some, shall we say ‘ deft ‘ takeover financing strategies when an acquisition is made. This often includes the management buyout scenario. Let’s look at some of the acknowledged ‘ smart ‘ ways to buy and finance a business purchase. Let’s dig in.

There are often great rewards when an existing business is purchased properly with the right underpinning of finance and mgmt skill. We’re told by ‘ experts’ that the financial markets are ‘ imperfect ‘ to some extent, and that’s probably the case with valuing and then buying a company.

From a ‘ valuation ‘ perspective there are of course several time tested ways to value the target firm. Naturally there are different motives for buying a business that is already doing well. (Or a business that needs to be repaired! which often presents even greater opportunity, and risk)

Those motives might be synergies, economies, faster growth, less competition, etc. Because a lot of valuation strategies are subject to opinion we’ve often focused more on the ‘ assets’ in the business. Good mgmt can usually reverse any losses, grow the business, etc

It’s the assets in the business that will allow mgmt to increases earning power if the true value of the assets is understood. In many cases a proper appraisal of assets may well be required or simply the right thing to do.

The ‘ hard ‘ assets in the business are typically equipment, technology hardware, vehicles. We also mustn’t forget leasehold improvements as a part of any firms potential asset mix.

The ‘ current assets ‘ in the business will be providing the takeover with the liquidity and asset turnover it needs to be successful. Understanding the quality and turnover of accounts receivable and inventories is key to successful takeover financing.

Note also that almost always intangible assets and goodwill are normally not financeable in the SME (small to medium enterprise) marketplace. Many firms invest in R&D, and in those cases SR&ED tax credits can be part of the financing plan.

Getting proper financial statements from the target firm is key to any financing takeover success, again keeping in mind all the ‘ subjectivity’ that comes with every item on the balance sheet ( except cash !).

What strategies are used to finance business purchases and mgmt buyouts in Canada? They include:

Govt Small Business Loans (new limit = $1,000,000.00)

Asset based loans

Sale leasebacks

ABL Business Credit lines

Tax Credit Financing

A/R financing

Unsecured Cash Flow Loans

Franchise loans

In many cases a combo of financing methods may well be required to ensure the right amount of debt and equity and cash flow and working capital needs required by the business. Seek out and speak to a trusted, credible and experienced Canadian business financing advisor who can assist you in proper business purchase finance.


Stan Prokop
– founder of 7 Park Avenue FinancialOriginating 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 :
http://www.7parkavenuefinancial.com

7 Park Avenue Financial

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


Office
= 905 829 2653


greg
@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

7 Park Avenue Financial
Canadian Business Financing