Walid Safi
Partner | Financial advisory

Financing offers for mergers and acquisitions are highly favourable right now. What steps should you take for a successful process?

There is a lot of capital available in Quebec, so much so that you can negotiate advantageous conditions if you want to acquire another business.

The search for financing must be based on a solid process in order to be carried our smoothly, in the most profitable and least risky way for you. Here are the main steps of the process and our tips for success.

1. Establishing an accurate portrait of your business

Above all, it’s important to have the most complete and accurate view of your business. Make sure you know the sources of its profitability, accurately measure the value of its assets, etc.

2. Assessing the purchase price

The current abundance of capital tends to increase the value of transactions. Various valuation methods can be used to determine the value of a transaction. The best option is to call on a business valuation expert to determine a fair price.

3. Estimating your financial needs and borrowing capacity

You must be prudent and realistic. All lenders evaluate a financing application based on its underlying risk and want to ensure that their clients will be able to meet their commitments in case of unforeseen events.

Therefore, you need to establish different scenarios for your business (for both growth and declines). Our experts will help you develop and validate these scenarios by applying resistance tests to guarantee that you can stay the course in difficult situations.

Make sure you have the necessary funds not only to finance the transaction, but also to support current operations (working capital, capital assets, internal growth projects,
etc.).

Note that there’s an adjustment period after a transaction, during which the business’s performance may not be as strong as planned. So you will need to inject enough oxygen into your capital structure to get through this period.

You also need to think long-term to ensure that you will be able to refinance your debt once it comes to maturity. For example, ask yourself what would happen if your business was not performing well when the time comes to refinance.

Don’t forget that there are two main types of traditional financing for which lenders use different ratios in order to evaluate your borrowing capacity:

  • Asset-backed financing, especially used for businesses that have significant inventories and assets, such as distributors. Lenders will take into consideration the value of the assets and the fixed charge coverage ratio (to measure the business’s loan repayment ability once it has assumed its current expenses).
  • Cash flow financing, especially used for businesses whose assets are not very high. Usually, two ratios are considered by financial institutions: debt to EBITDA (earnings before interest, tax, depreciation and amortization) and the fixed charges coverage.

This said, lenders may use several other ratios.

4. Soliciting financing

The purchase price, your borrowing capacity and any balance of sale (the portion of the value of the transaction that you will ultimately reimburse to the seller) will determine whether you also need to obtain equity financing from co-investors.

Generally, financial institutions will ask that equity financing represent 35% to 55% of the transaction’s value, entirely injected by yourself or by joining forces with a co-investor.

It is essential to develop a capital structure with an optimal combination of both types of financing that provides you with sufficient leverage for today and in the coming years. However, make sure this leverage is not excessive.

Lastly, we recommend soliciting several lenders and financial partners at the same time to accelerate the process and, the competition will help you negotiate the most advantageous terms and conditions.

Are you thinking about buying a business? Contact our multidisciplinary team. Our experts will guide you every step of the way.


 

Do you know business people who dare to think and do things differently? You have until December 20, 2018 to nominate a candidate.

22 Nov 2018  |  Written by :

Walid Safi has over a dozen years of experience in mergers and acquisitions. Contact him !

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In addition to the economic aspects, the legalization of cannabis has raised a number of challenges for municipalities since coming into effect.

Ottawa may legislate and Quebec may regulate the sale and distribution, but it’s municipalities that have to manage the local problems.

Municipalities are responsible for services to citizens, such as cannabis selling zones, business permits and building codes. Internally, they have to ensure the implementation of bylaws on the consumption of cannabis in public, impaired driving and workers’ safety, the topic of this article.

Does the municipality have employee policies? Does it have the right tools? Does it have what it needs to inform its employees and raise awareness?

Action rather than reaction

So far, so good… but should the municipality be waiting for the first incidents before introducing an efficient internal policy? Most large municipalities have been proactive, like Montréal, that has trained its police officers to identify signs of impaired faculties. What about small- and medium-sized municipalities? Simply adding a sentence on cannabis in the drug and alcohol policy is probably not enough.

For example, winter is coming and snow removal will result in considerable snow removal equipment moving about on the streets. In the short term, to avoid dangerous situations for citizens, it’s essential to identify high-risk jobs to ensure there is appropriate support to apply a policy on the use of cannabis by municipal employees. Consider the private sector, where some businesses have introduced efficient policies, including, among others, zero tolerance provisions.

Some municipalities have decided to set up special commissions to survey the population about the impacts of cannabis legislation on municipal services.

It’s too soon to know what the consequences will be and have accurate data on the impact of cannabis on our daily lives and, more specifically, high-risk jobs. Nevertheless, it’s up to municipalities to anticipate, prevent and act before something happens.

There are a number of organizations that can support your initiative, such as the Canadian Centre for Occupational Health and Safety or CLSC health professionals. Our management consultants can help you get training and inform your teams and managers.

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Emilio B. Imbriglio
President and Chief Executive Officer | FCPA, FCA, MBA, CFE, ICD.D.

Business leaders have already shared their entrepreneurial vision with our President and CEO, Emilio B. Imbriglio, in exclusive interviews.

Always relevant, their comments deserve our attention. We will present them to you in the coming weeks.

In these videos, John Marcovecchio, now CEO of Magil Construction, discusses several topics, including the importance of leadership, public-private partnerships (PPPs), business leader’s vision and acquisition strategies.

 

It’s very important as a leader to get to know the people that work with you.

 

Raymond Chabot Grant Thornton is proud to present these high-level meetings filmed in an unusual and spectacular location: outside, on the roof of Place Ville Marie.

To find out more, view these short videos.

 

On acquisition

 

On talent management

 

On parallels between poker & business

 

On public sector projects

13 Nov 2018  |  Written by :

Mr. Imbriglio is partner and the President & CEO of Raymond Chabot Grant Thornton. He is in charge...

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Louise Martel
Partner | B.A.A, C.R.I.A. | Management consulting

How can I find the employees I need? How can I attract the best talent? Thousands of entrepreneurs like yourself are asking themselves the same questions.

Employers are under pressure because of the labour shortage. There are currently some 11,000 vacancies to be filled in Quebec according to Canadian Federation of Independent Business 2018 second quarter data.

In this context, you need to stand out from other employers and, now more than ever, you need to adopt recruiting best practices. Here are six key tips for a successful process.

1. Work on your employer brand

First, you need to position yourself as an employer of choice and project this image in the community. The more you’re talked about, the more candidate attention you’ll garner.

We suggest having an efficient social media presence. You can post job offers, of course, but remember to publish interesting articles on a regular basis, showcase your successes and the development opportunities you offer, talk about social events you are involved in and the organizations you support, etc.

Here are the main aspects you should pay special attention to:

  • Corporate values and culture;
  • Work environment—it should be pleasant and energizing;
  • Team spirit and approaches to engaging staff;
  • Advancement challenges and possibilities;
  • Global compensation and other benefits;
  • Working conditions (flexible hours, option to work offsite, etc.);
  • Support (training, coaching, mentoring, etc.);
  • Quality of the management team;
  • Work tools;
  • Entity’s social involvement.

Your current and former employees are your best ambassadors to promote your employer brand. Make sure you maintain excellent relationships with them (to stay in touch with former employees, hold a “former employee day” each year for example).

We recommend an exit interview with employees who are leaving. This will help you pinpoint areas that may need adjustments. This is also a good opportunity to express your recognition for their work.

2. Be in enticement mode

In the current context, it’s no longer a case of candidates selling themselves, you have to entice them.

How you greet the candidate for the first meeting will be key. The meeting should be more of a discussion than an interview and take place in a relaxed atmosphere. Take the time to talk about the entity, its culture and how it works, so the candidate will feel that you have a dynamic organization.

Today’s candidates are looking for challenges. You have to prove that what you offer is up to their expectations. However, be open and transparent: don’t make promises you can’t keep. If your organization is facing certain challenges, it’s to your benefit to talk about them and how you plan to address them.

3. Be flexible

Don’t consider that all of your selection criteria are set in stone. Instead, consider assessing candidates who stand out for their development potential and ability to integrate well in your organization’s culture.

4. Act quickly

Candidates looking for jobs often have several offers. If you find that a candidate seems promising, make an offer quickly or you run the risk of losing the person to another organization. Generally, make sure your recruiting process is as flexible and fast as possible.

5. Develop resources internally

As an employer of choice, you must have a solid competency development and succession planning program. The ideal candidate to fill a key position may already be working for you!

Most employees are looking for opportunities to progress. You should support them, offer training, coaching and mentoring. Target employees who seem the most apt to be promoted to strategic positions so you can give them the necessary development support.

6. Get help

That said, finding the real gem is no easy task. We recommend that you call on human resource and recruiting specialists, like those at Raymond Chabot Grant Thornton. We offer a full range of human resource services. We can help you position yourself as a particularly appealing employer and find candidates who will fit in perfectly in your organization.

Do you know business people who dare to think and do things differently? You have until December 20, 2018 to nominate a candidate.

13 Nov 2018  |  Written by :

Ms. Martel is a partner at Raymond Chabot Grant Thornton. She is your expert in human resources for...

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