One Way To Buy A Company . Use ABL Finance Via An M & A Business Loan For Acquisition Financing

Acquisition Finance For Success – The Why And How


Information on acquisition financing in Canada . Consider a business loan via ABL finance to successfully complete your transaction with no money down ? !


There's just a lot of interest these days, it seems, in acquisition financing as a way for Canadian business to achieve various different objectives. One way in which they can be successful is via an ABL finance business loan to finalize that objective.

Why do companies want to acquire each other ? Of course it's for a variety of reasons, including growing sales, becoming a market leader in their niche, cost reduction, or buying the ' secret sauce' technology of another firm.

We're always on the look for some new thoughts in Canadian business financing, so we were drawn to an article in one of the two leading Canadian business newspapers the other day which had the catchy title of buying a company with ' no money down. The article was written by one of Canada's respected investment officers and fund managers.

No money down? And acquire a significant business at the same time? We were intrigued. The essence of the article was that many ' bargains ' are available in Canadian business - it’s a question of finding them! The article went on to say that the essence of such a search, once you have found a target firm, is to go back 50 years. Go back 50 years ? !Actually what the author meant was that at this point in your search it's time to call on Benjamin Graham , acknowledged as the father of value investing by almost all, including his prize teach pet student Warren Buffet .

What's recommended by these ' guru's is to look at ‘ net working capital ‘ - something we focus on a lot in our own preachings. That figure is made up of receivables, inventories and any cash on hand.

What about the other assets though? Essentially it's offered up that they don't mater. We think they do, but Mr. Graham and Buffett actually disagree with us .. the nerve!

So this is where we come in. Where the author of the article focuses on dealing with Canadian chartered banks we prefer a faster better route, ABL finance.

The beauty of ABL financing, via an asset based line of credit is that it can also include the fixed assets that seemed to have been discounted by Mr. Graham and Mr. Buffett.

A true asset based line of credit encompasses our previously mentioned current asset accounts, as well as unencumbered fixed assets. And while the article we referenced focused on bank financing the reality is that an acquisition financing via ABL finance provides a higher margin level on these assets. Typically those margins are 90% of receivables, significant inventory advances subject to appraisal / valuation, and financing for liquidation value of fixed assets.

More often than not firms in the SME sector that want to buy another business can generate no interest in Canada from ' private equity ' or ' VC' firms, as those firms focus on larger transactions.

So, no money down? The jury might still be out on that one, but we do assure clients that an ABL loan is a great financing alternative when you are looking to purchase another firm for competitive reasons.

Speak to a trusted, credible and experienced Canadian business financing advisor when you want to further your acquisition finance objectives.




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/acquisition_financing_abl_finance_business_loan.html

Sound Acquisition Financing Ideas – Commercial Business Loans For Purchase & Merger

Your company has made the decision to either merge or acquire another business. What are some of the key issues in successfully completing acquisition financing and business loans for commercial entities in Canada?

A good place to start is simply to ensure you’ve got the right reasons or goals around a merger or acquisition. In some cases you wish to diversify your company, more often than not though it’s simply a case of growing, both sales and profits of course.

Is the term ‘opportunistic a negative one? We certainly don’t think so when it comes to legitimate business dealings, so in many cases you simply have come across a firm or competitor that in your opinion is undervalued. Bottom line, it’s a bargain and you're focused on exploiting either undervalued assets or companies that are not performing well in certain market conditions.

Don't forget also that acquisition financing is all about some even more common sense scenarios as identified above. Its often a classic opportunity to lower your operating costs as overheads in the dual firm can be cut and other efficiencies can be extracted from the combined mix .

What are the types of acquisitions? We can summarize those into three areas, and in some cases the type of acquisition you make will impact directly the type of financing and commercial business loans that you achieve.

Back to our three merger scenarios - they are as follows: friendly, hostile, and leveraged or management buyout. Many smaller companies are of course happy and content to be taken over; they fully realize the potential synergies. However in certain cases it gets somewhat ' ugly ' in that the management or owners of the firm you intend to buy or acquire simply are opposed to the idea.

Leveraged and management buyouts tend to be asset driven. The downside of a leveraged or management buyout is that if done improperly a large amount of debt can leverage your new firm negatively. There are numerous creative ways to finance acquisition financing in Canada.

Financing methods include asset based lending, subordinate or mezzanine debt (i.e. unsecured loans based on historical and future cash flows) as well as a private equity component.

Valuation is an important aspect in the area of acquisition financing. Your valuation will have a direct impact on the business loans you enter into to complete the purchase. In evaluating a final valuation or purchase price you will want to look at things like general financial operating activities - i.e. the financials. But don’t forget also that other factors such as new assets that might be required, working capital needs, etc also will drive that final valuation number.

In summary, when contemplating acquisition financing look at issues such as the proper mix of debt and equity, cash flow analysis, , and various areas of operational risk and reward . If you want financial alternatives in financing your acquisition consider talking to a trusted, credible and experienced Canadian business financing advisor who will assist you in this exciting area of Canadian business finance.



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 .Info re: Canadian business financing & contact details :


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