Category Archive: Uncategorized

1. Selling a Business in an Economic Downturn, To Buy or Sell – This is the Question

   May 12, 2020 6:29 pm Comments Off on Selling a Business in an Economic Downturn, To Buy or Sell – This is the Question

   

   by Trevor Hood
   Original post: https://sbpartners.ca/selling-a-business-in-an-economic-downturn/

   Selling your business in an economic downturn and trying to achieve the highest price available would appear to be an unfortunate dilemma for any business owner. If you were contemplating a sale prior to these turbulent economic times brought on by the COVID-19 pandemic consider the following…

   In the context of mergers and acquisitions
   Economic downturns often result in the tightening of corporate coffers resulting in an overall reduction in acquisitive activity. Selling in the midst of a storm would generally be unwise.

   In light of the current borrowing environment, with the cost of debt continuing to hover at relatively all-time low levels which has lasted for the better part of over a decade, and stimulus offered by Central Banks resulting in continued low costs of borrowing, it may be the perfect time for investors with the appetite for risk to buy. The lower your cost of capital, the easier to bolster returns on borrowed funds.

   It is worth noting that a decrease in public company price-earnings ratios tends to produce a corresponding “trickle-down” effect for the multiples paid for private companies – the higher the risk, the lower the multiple that is going to be paid. In the long-term, we expect that public panic will retreat, pent-up demand for goods and services will come on-line, and in conjunction with central bank stimulus injections will culminate in an appreciation of financial assets. The perfect time to sell may be just around the corner. While purchasers will recognize the impact of the pandemic when assessing historical results, just how the business was able to weather the storm will be a major consideration for them.

   Listed below are some measures for you to focus on the marketability of your company that could help maximize value in this current environment:

   Understand the drivers of value for your business
   Business value drivers are critical factors that will factor heavily in a potential purchaser’s valuation assessment. Identifying and understanding those drivers will allow you to ‘de-risk’ the company thus enhancing value.

   Get your ‘House In Order’
   Obtain a buyer’s due diligence listing and prepare for each item noted. While a focus on survival is essential, using excess capacity within your staff to work on those little things that you never have time for (i.e. policies and procedures documentation, standard employment contracts, etc.) will provide long term benefits. Along with this preparation, ensure your financial statements are clear of personal and non-business items and look to obtain basic tax planning and implement any changes that are required.

   Lock-in key customers
   How you work with your customers during this crisis will go a long way in establishing and building those relationships for the long-term. In working with them, look also for opportunities to create longer-term contractual arrangements or improved payment terms that are mutually beneficial.

   Make yourself redundant
   Probably the largest risk factor in the sale of private companies is their dependence on the owner of that business. Taking steps to expand customer relationships amongst your team, documenting, and sharing the technical know-how of what you do on a daily basis, and positioning the business so that it can operate without you is critical.

   Demonstrate that you have a viable business interruption plan

   Take steps such as:

   1. Establish a Business Interruption Emergency Team – To spearhead the project from cradle to grave.
   2. Identify essential functions, services, staffing – That are integral to a business’s ability to deal with a crisis.
   3. Prepare a plan for each of the essential areas identified along with a process to triage these issues and work through them on an effective basis.
   4. Test the plan ensuring it addresses and mitigates all identified risks.

   The value of any business depends on its capacity to generate cash flows, the expected growth in these cash flows, and the actual or perceived uncertainty associated with these future cash flows. Eliminate risks associated with your business and any uncertainty associated with cash flows that are under your control.

   Even in times such as these, business owners can still maximize the price received in a transaction regardless of the existing economic environment, boom, or bust.

   By Trevor Hood, CPA, CA, CBV, CFF
   Financial Professional
   SB Partners LLP
   3600 Billings Court, Suite 301, Burlington, ON , L7N 3N6
   Tel: 905-633-6353
   Fax: 905-632-9068
   Email: thood@sbpartners.ca

    

2. Learning from our Clients – The requirement for a Standard Participation Agreement

   January 9, 2015 6:40 am Comments Off on Learning from our Clients – The requirement for a Standard Participation Agreement

   

   by Marian Gage

   As Collaborative practitioners we receive our most important feedback from the clients who retain us and choose this process.

   I’ve recently had the opportunity to speak with a former Collaborative Practice client about his experience with the process. He was not my client and I will call him “John Smith” although that is not his real name. It was not a good experience. It was certainly not the experience that we, the professionals, anticipate when we promote the process to potential clients. What went wrong? What can we learn from Mr. Smith’s unfortunate experience?

   Mr. Smith started out as all collaborative clients do. He chose a lawyer trained in Collaborative practice. He and his lawyer began communicating with his wife’s lawyer who also advertised herself as a trained Collaborative lawyer. But things quickly took a wrong turn when it came time to sign a Collaborative Participation Agreement.

   “(My lawyer) and I were asked to sign a collaborative agreement that excluded any disqualification clause and demanded mandatory arbitration if we failed to come to an agreement in 6 months.”

   The “disqualification clause” Mr. Smith refers to is the standard provision in the Collaborative Participation

   Agreement that provides that if either party terminates the process and begins litigation both parties must “start from scratch” with new lawyers and the collaborative lawyers participating in the process may not transition to a litigation process with their clients. Among other reasons this is intended to be a disincentive to litigation.

   Those of us familiar with the practice know that this is not only odd but in direct contrast with a process that has the goal of encouraging dialogue and negotiation without the threat of litigation looming in the background.

   Mr. Smith agreed that requiring all clients and lawyers to sign a standard participation agreement would provide clarity about the process up front. In his words, “I was blindsided by the process and would have known more quickly what I was up against if this was the standard practice.”

   Mr. Smith’s lawyer, a well-respected Collaborative family lawyer, attempted to continue negotiations in a “collaborative” manner.

   According to Mr. Smith, “they (his wife and her Collaborative lawyer) were highly aggressive and combative and I was forced to move to a litigation lawyer…my lawyer had continuing difficulties with the other lawyer and we were very close to going to court. I finally signed an unequal agreement to cut my losses.”

   This is not the way we profess to practice, however, there are lawyers who have taken the training that allows them to sell themselves as Collaborative family lawyers. If our clients find themselves in a process with such a lawyer they, like Mr. Smith, will likely have a miserable experience. This tarnishes the reputation of a process we are trying to promote as a better way to resolve family disputes.

   As professionals working in this area we have no control over the lawyer our client’s spouse or former spouse chooses (nor should we) and we have to work with what we are given. If the other lawyer is not prepared to uphold the basic tenets we learn are so important to the process, sometimes the best we can do is explain this to our clients so that they do not walk away thinking that what they experienced was, in fact a Collaborative process.

   For clients seeking out Collaborative family lawyers it is important to ask a potential lawyer how long he or she has practiced in the area, what training they have as a Collaborative practitioner, how many recent cases he or she has done where the parties signed a Collaborative Participation Agreement and what the practice means to him or her.

   Collaborative practitioners are at odds as to how much regulation and oversight this practice area requires. I will not comment on that in this article. Mr. Smith’s case highlights the need for Collaborative lawyers to insist on a standard Participation Agreement that sets out a true Collaborative process.

   By Marian Gage, B.J., LL.B, AccFM
   Berry Gage
   Family Law & Mediation
   165 Cross Avenue, Site. 301
   Oakville, ON
   L6J 0A9
   Tel: 905-338-7941
   Www.bgfamilylaw.ca

3. Mediation: Why It’s Better To Help Each Other Climb The Mountain

   March 25, 2013 12:56 pm Leave a Comment

   

   By Meredith Cox

   Depending on how the day has unfolded I may indulge in N.C.I.S. or Criminal Minds reruns or some lighter fare such as Real Housewives of Vancouver.  One late night I tuned into Family Matters, Justice Harvey Brownstone’s show on Family Law.

   The guest was former Alberta Court Judge, Michael Moran.  He was explaining his decision to leave the bench after 22 years to become a mediator so he could serve the public better.  As a mediator he has the luxury of being able to listen fully to the parties’ perspectives to help them solve their own problems.  He cited the “Judge Judy Phenomenon” where the litigants tell their story, she interrupts a few times, gives a quick decision and they cut to a commercial.  The result of the show is a distinctly false impression of the justice system.  Judges do not always have the freedom to dig deep and understand every aspect of the conflict.  Judicial decisions are frequently made in the face of incomplete information.  He realized the best outcome could not possibly come from a fraction of the story.

   I was reminded of two recent cases in which I had acted for the husband and the wife respectively.  We started both cases by suggesting mediation to the other side.  They refused so we commenced a proceeding in Court.  In one case my client was threatened with contempt of court for trying to tell her side of the story.  We were getting nowhere and the trials were looming.  Neither party had the funds for a trial.  After many fruitlessly painful court attendances and thousands of dollars later we came full circle and agreed to mediation.

   After the first mediation session both clients reported feeling satisfied with the way the day unfolded.  They felt heard and understood.  They sat with a mediator for the day and hashed out their issues.  Both parties got to talk at length about what they wanted and what happened behind the scenes before and after separation.  It took time, but it was well worth it.  Some of the misunderstandings were cleared up.  At the break one of the couples went out to get coffee for everyone.  They returned chatting and laughing.  The connection between them was tangible.  In both cases, the mediator used the newly built bridges to assist with designing the terms of the settlement.

   The process of mediation got the parties and the lawyers into different mindsets of calm, compassion and warmth.  We worked as teams instead of adversaries to climb the proverbial mountain.  It was not easy, but both cases eventually settled.  Mediation produced healthier and more effective ways to resolve conflict for the clients.  Simply, it was less stressful and more rewarding for all involved.

   About Meredith Cox

   Meredith Cox is a collaborative family lawyer and trained mediator.  Her law practice and ongoing education have focused on the diverse interests of family law clients since 1994.  After learning about Collaborative Family Law in 2002, she was immediately convinced the process offered a better way to help clients create their own solutions.  Meredith is firmly committed to resolving family law disputes respectfully and sensibly for the sake of the clients and the children caught in the middle.