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Financing an acquisition in Canada. Or is it a Merger that needs a solid business financing solution? There are probably a good handful of technical or financial differences around the differences between a merger and an acquisition, and we of course all know it's rare that you would have a perfect alignment of the planets - two companies that have identical business, equal asset strength, and income statements that are perfectly complimentary. That's the perfect world. But Canadian business owners know it's not a perfect world and that such ' perfect storm' scenarios exist. We can also make the case that years ago mergers and acquisitions were financed on the basis of asset values. These days it's safe to say there are lot of goodwill and analysis of future cash flows that play a large part in the total financing equation. When we meet clients and talk to them about their M&A needs a few basic reasons always emerge as to some essential deal basics? In some cases the firm being acquired might be in somewhat of a 'death spiral ' due to mismanagement or its inability to wrestle with present economics. Heaven forbid, but we also even see crisis type situations. Other scenarios that are part of the M&A profile includes owners ' cashing in' , family business scenarios, and growth opportunities that can't be realized by a firm without additional help, or financing. So what do you need to consider when it comes to financing that acquisition or merger? It's important to understand both your internal and external resources, and to ensure you understand the different options you might need to complete an appropriate financing. We say ' appropriate ' because we often seen mergers and acquisition financing that have been the solution, but far from the right one. This is exactly the right time you should be looking at your team - which might include a Canadian business financing advisor, your lawyer, accountant, etc. Here's where issues that might seem over technical to non financial types can hopefully be clarified in a common sense manner. They might include goodwill valuation, deprecation policies, asset valuations, etc. Although you need financing for the merger it's also important to understand what the borrowing capabilities will be for the new entity, and what form they might take. Solutions such as asset based lending, the gov't CSBF loan, subordinated debt, and vendor take backs can all play a key part in a successful acquisition financing. It's precisely at this point that issues such as leverage can make or break ongoing business success. Putting one ' over - borrowed' company together with another leads to... well... you know... business failure. For help in managing thru and completing an acquisition or merger speak to a trusted, credible and experienced Canadian business financing advisor. 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/financing_acquisition_finance_mergers_business.html
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