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Business acquisition financing in Canada. It conjures up visions of having to be a Bay Street / Wall Street heavyweight when it comes to sophisticated financial knowledge. But for smaller and medium sized corporations there is a healthy element of ' do it yourself ' when it comes to acquisitions of competitors, synergistic companies, etc. But don't under emphasize the importance of a solid external team to assist you . Let's examine some solid ' need to know ' info that will help the Canadian business owner and financial manager address any acquisition successfully. The amount of proper financing that you can generate, internally and externally (mostly externally!) will ultimately play a large part in the size of the company with whom you might be acquiring, or merging with. Here is where valuations come into play and anywhere from 30 - 50% of the final price that you agree on might in fact have to represent a cash type scenario. Naturally there are a thousand stories in the naked city, as many firms are acquired simply for the reason that they are not profitable for the current ownership. This does bring up a very key point though, which is that if you are looking at acquiring a firm that is in trouble, losing money, losing market share/sales etc then in fact a lot less cash is required for the transaction. However at that point you'll obviously have other challenges to address. If there is a solid piece of advice we can give to the Canadian business owner and financial manager it's to start a financing strategy around your acquisition early on. That final capitalization of the proper amount of debt and equity is critical. When contemplating bank financing for business acquisition financing in Canada a solid, realistic and succinct business plan is required. We see many plans from clients that are far less than ' succinct ' and therefore raise more questions than answers. So what does one in fact have to demonstrate to the bank? A good start is how your firm will operate the business - so a good examination of the financials and any key issues around seasonality of sales and cash flows, customer concentration, production, and credit terms are key. If the business you are acquiring does in fact have challenges it's clearly a good time to demonstrate how you will implement controls and changes around those challenges. Spend a lot of time considering the amount of leverage you will ultimately have when acquisitions are completed. It's tempting of course to become highly leverage but this is the classic double edged sword of business financing , and don't think that high leverage will guarantee higher returns to shareholders, as that debt you are now carrying can in fact become a day to day nightmare down the road if not managed or financed properly . Business acquisition financing in Canada is about finding a solid opportunity, analyzing your transaction carefully, and closing with the best financing possible based on your industry profile of debt and overall capitalization. Speak to a trusted, credible and experienced Canadian business financing advisor who can assist you with acquisitions that make sense- financially! 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_acquisitions.html
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