Our founder, Paris Aden, is recognized nationally by TEC Canada for speaking excellence and is among the top 5% of their most requested speakers in Canada. He was also the only three-time expert panel moderator for the Business Transitions Forum (BTF) in Toronto, the largest conference of its kind in Canada. During that time, he also served on the BTF’s board of advisors. Paris has also provided continuing education curriculum to the CBV Institute and spoken at industry conferences for the Innovators Alliance, the Saskatchewan Heavy Construction Association and the Auto Parts Manufacturers’ Association. He is a prolific contributor to Divestopedia and was featured as an expert panelist for its “Masterclass on Selling a Business: Roundtable Discussion with Leading Global Investment Bankers.” Paris’ articles have also been published by Touchpoint, TEC Canada, the Business Transitions Forum and the Auto Parts Manufacturers’ Association.
We share many of the insights we have shared with these groups here and we will continually expand this knowledge base.
In this Excel file, you will find supporting calculations for the examples shown in the related webinar titled “How Do I Triple the Value of My Business by the end of 2025?”, hosted by our Founder and 2019 TEC Canada Rookie of the Year, Paris Aden. The concepts covered include the Weighted Average Cost of Capital, several examples of value creation opportunities, and the impact of certain assumptions on the value of your business.
Maximizing the value of the business is an imperative for any business owner. The need for value creation is accentuated by the fact that for most owners, the majority of their net worth is tied to their business, which is by nature a risky and illiquid asset. Our founder, Paris Aden, hosted the interactive webinar titled “How Do I Triple the Value of My Business by the end of 2025?” and within this accompanying presentation, you will find explanations of concepts such as the Economic Value-Added model, as well as several examples of specific steps you can take now to select high-growth, quality projects and maximize the value of your business over time.
In this interactive session, Paris Aden, our Founder provided attendees with actionable insights surrounding:
- How to apply the Economic Value Added (EVA) model to your business
- How to identify concrete steps you can take now to dramatically increase your business value over time
- Three examples of tripling shareholder value: footprint expansion, acquisitions, and expanding the sales force.
A growing universe of financial buyers has been effectively competing with strategic buyers on valuation, along with a proliferation of intermediaries that are continually extending their reach into an ever-broader buyer universe. As a result, more businesses are being sold in highly competitive auctions and proprietary deal flow is becoming increasingly challenging. A structured, proactive acquisition program delivers superior results in this environment.
Developing the capability to realize the benefits of proprietary acquisitions is laden with challenges, including the commitment of substantial resources and the strategic alignment across the organization. Bearing that in mind, a reliable and comprehensive framework is invaluable in developing and implementing a state-of-the-art, proactive acquisition program which ensures that resources are adequately managed, and results maximized.
A successful acquisition can create significant shareholder value. However, a positive outcome is not inherent in the acquisition process, and it depends on the development of core competencies necessary to align an organization’s capabilities with its desire for proprietary acquisitions. The inevitable risks associated with the acquisition process can be considerably mitigated by the application of external, purpose-built resources.
A systematic, proactive acquisition strategy that surfaces passive sellers at reasonable valuations works in concert with conventional sourcing strategies and can produce significant strategic and financial benefits. The benefits of developing a pipeline of proprietary acquisitions are manifested through superior valuations, strategic choice and increased activity levels. In this section, we address some of the questions that strategic acquirers may have when making decisions concerning proprietary acquisitions.
In this article, the first in a two-part series, Paris Aden, partner and founder of Valitas Capital Partners, a boutique M&A advisory firm in Toronto, examines the benefits of hiring an advisory team to do sell-side due diligence before going to market. In the second part, we’ll look at the benefits of doing your due diligence on potential bidders once you’ve gone to market.
In the first part of our two-part series, Paris Aden, partner and co-founder of Valitas Capital Partners, a boutique advisory firm, discussed the benefits of hiring an advisory team to do sell-side due diligence before going to market. In this second part, Paris sits down with The DealRoom to offer some insights on how the seller should approach their own due diligence on bidders once they’ve gone to market.
Founding partner of Valitas Capital Partners and TEC speaker Paris Aden explains the uncertainty around the global economy going into 2019 and what companies can do to ensure they are prepared if a recession hits.
That dollar figure, whether written on a napkin over coffee or floated in a conversation, is not a binding offer. Any potential acquirer will need to conduct a due diligence investigation before they can enter into a definitive agreement to buy your business. Initial indications can be tactically inflated to ensure the acquirer gains access to your confidential information after which this price is systematically reduced, citing negative findings during due diligence—also known as the due diligence grind. There are a number of strategies to neutralize this tactic.
The development and implementation of communication principles, strategies and protocols are essential to protect your company and its stakeholders from leaks regarding the existence of any process that could result in a sale of your business. These communication protocols are also intended to protect your commercially sensitive information from both current and potential competitors. The protection of your confidential information requires a comprehensive strategy that addresses many potential scenarios.
It is uncommon for a business to be opportunity constrained. Often, the issue is not having high-return projects to invest in but choosing which to fund. This is a capital-constrained situation. Equally important is choosing how to fund those projects. The cheapest and most expedient option would be to use cash on hand, but this limits the possible pace of investments. When you have more opportunities than capital, do you forgo quality opportunities, raise equity, or arrange for more debt?
It’s uncommon for a business to be opportunity constrained. Often, the issue isn’t having profitable projects to invest in, but choosing which to fund. We call this being capital constrained. Equally as important is choosing how to fund those projects. The cheapest and most expedient option would be to use cash on hand, but this limits the pace of investments possible. When you need to bring in outside capital, should you choose equity or debt?
Far too many business sale attempts fail. Estimates of the failure rate range from 50% to higher than 75% and tend to correlate inversely with the size of the business. Assessing the saleability of your business is an essential first step on the path to successfully realizing its value. It helps you objectively assess the likelihood that your business will be sold if you embark on the process and mitigate the risk of failure.
As you move further along in the M&A process, there appears to be an escalation of disclosure, which raises a question of what exactly you need from a bidder to reveal the information requested. Learn more about the aspects of this stage of a sale process from Paris Aden, the Founder of Valitas Capital Partners, who speaks at the Toronto Business Transitions Forum.
It is essential that confidentiality is maintained throughout any Process. We have advised on many M&A projects and leaks are rare. We have worked on projects where the working group was 100 people including the company personnel and advisors on both sides over several months with no leaks. With the appropriate precautions, we expect that Processes will run smoothly and that confidentiality will be maintained.
Learn about one of the key transactions that inspired how Valitas operates today. Paris Aden, the Founder of Valitas, worked closely with his client, Bob Liew, to sell Island Hearing to unleash the true value potential of his business. As a result, the return on the future earnings of the business exceeded all possible expectations, and the overall value-add of the relationship with Valitas helped Island Hearing achieve their long-term goals as an organization.
Whether you have received a preliminary proposal from a single party who approached you or you’ve received several non-binding bids through a structured auction process, the nature of the process changes from proactive to reactive as due diligence progresses. Ultimately, each bidder will have different due diligence requirements and the onus is on the seller to satisfy those requirements (or not). The due diligence stage is the acquirer’s opportunity to investigate the business from top to bottom. Although difficult, it is essential to maintain control of the process, despite your reactive position during this phase of the process.
It is a common fallacy that an exclusively negotiated deal is faster, easier and quieter than a structured process. In reality, the acquirer with exclusivity rarely moves with urgency, often extending due diligence and dramatically reducing the likelihood of closing at the agreed price, if at all.
In every sale transaction, there is a “window of vulnerability” for the seller that starts with the initiation of sale discussions with a potential buyer and ends with the closing of the sale. This article discusses three inevitable risks that a seller will encounter in an M&A transaction.
Rather than simply selecting the lowest priced advisor, it is critical for sellers to conduct rigorous due diligence when making this important decision. This includes reference checks with previous clients, asking about the advisor’s track record with prior transactions and doing desktop research on multiple advisors. In fact, there isn’t one single industry standard, and fees vary by structure, size and terms. To gain additional perspective on this topic, we spoke to John Carvalho, President of Divestopedia, who shared some of his insights.
In this Excel file, you will find supporting calculations for the examples shown in the related webinar titled “How Do I Triple the Value of My Business by the end of 2025?”, hosted by our Founder and 2019 TEC Canada Rookie of the Year, Paris Aden. The concepts covered include the Weighted Average Cost of Capital, several examples of value creation opportunities, and the impact of certain assumptions on the value of your business.
Maximizing the value of the business is an imperative for any business owner. The need for value creation is accentuated by the fact that for most owners, the majority of their net worth is tied to their business, which is by nature a risky and illiquid asset. Our founder, Paris Aden, hosted the interactive webinar titled “How Do I Triple the Value of My Business by the end of 2025?” and within this accompanying presentation, you will find explanations of concepts such as the Economic Value-Added model, as well as several examples of specific steps you can take now to select high-growth, quality projects and maximize the value of your business over time.
In this interactive session, Paris Aden, our Founder provided attendees with actionable insights surrounding:
- How to apply the Economic Value Added (EVA) model to your business
- How to identify concrete steps you can take now to dramatically increase your business value over time
- Three examples of tripling shareholder value: footprint expansion, acquisitions, and expanding the sales force.
A growing universe of financial buyers has been effectively competing with strategic buyers on valuation, along with a proliferation of intermediaries that are continually extending their reach into an ever-broader buyer universe. As a result, more businesses are being sold in highly competitive auctions and proprietary deal flow is becoming increasingly challenging. A structured, proactive acquisition program delivers superior results in this environment.
Developing the capability to realize the benefits of proprietary acquisitions is laden with challenges, including the commitment of substantial resources and the strategic alignment across the organization. Bearing that in mind, a reliable and comprehensive framework is invaluable in developing and implementing a state-of-the-art, proactive acquisition program which ensures that resources are adequately managed, and results maximized.
A successful acquisition can create significant shareholder value. However, a positive outcome is not inherent in the acquisition process, and it depends on the development of core competencies necessary to align an organization’s capabilities with its desire for proprietary acquisitions. The inevitable risks associated with the acquisition process can be considerably mitigated by the application of external, purpose-built resources.
A systematic, proactive acquisition strategy that surfaces passive sellers at reasonable valuations works in concert with conventional sourcing strategies and can produce significant strategic and financial benefits. The benefits of developing a pipeline of proprietary acquisitions are manifested through superior valuations, strategic choice and increased activity levels. In this section, we address some of the questions that strategic acquirers may have when making decisions concerning proprietary acquisitions.
In this article, the first in a two-part series, Paris Aden, partner and founder of Valitas Capital Partners, a boutique M&A advisory firm in Toronto, examines the benefits of hiring an advisory team to do sell-side due diligence before going to market. In the second part, we’ll look at the benefits of doing your due diligence on potential bidders once you’ve gone to market.
In the first part of our two-part series, Paris Aden, partner and co-founder of Valitas Capital Partners, a boutique advisory firm, discussed the benefits of hiring an advisory team to do sell-side due diligence before going to market. In this second part, Paris sits down with The DealRoom to offer some insights on how the seller should approach their own due diligence on bidders once they’ve gone to market.
That dollar figure, whether written on a napkin over coffee or floated in a conversation, is not a binding offer. Any potential acquirer will need to conduct a due diligence investigation before they can enter into a definitive agreement to buy your business. Initial indications can be tactically inflated to ensure the acquirer gains access to your confidential information after which this price is systematically reduced, citing negative findings during due diligence—also known as the due diligence grind. There are a number of strategies to neutralize this tactic.
The development and implementation of communication principles, strategies and protocols are essential to protect your company and its stakeholders from leaks regarding the existence of any process that could result in a sale of your business. These communication protocols are also intended to protect your commercially sensitive information from both current and potential competitors. The protection of your confidential information requires a comprehensive strategy that addresses many potential scenarios.
It is uncommon for a business to be opportunity constrained. Often, the issue is not having high-return projects to invest in but choosing which to fund. This is a capital-constrained situation. Equally important is choosing how to fund those projects. The cheapest and most expedient option would be to use cash on hand, but this limits the possible pace of investments. When you have more opportunities than capital, do you forgo quality opportunities, raise equity, or arrange for more debt?
It’s uncommon for a business to be opportunity constrained. Often, the issue isn’t having profitable projects to invest in, but choosing which to fund. We call this being capital constrained. Equally as important is choosing how to fund those projects. The cheapest and most expedient option would be to use cash on hand, but this limits the pace of investments possible. When you need to bring in outside capital, should you choose equity or debt?
Far too many business sale attempts fail. Estimates of the failure rate range from 50% to higher than 75% and tend to correlate inversely with the size of the business. Assessing the saleability of your business is an essential first step on the path to successfully realizing its value. It helps you objectively assess the likelihood that your business will be sold if you embark on the process and mitigate the risk of failure.
As you move further along in the M&A process, there appears to be an escalation of disclosure, which raises a question of what exactly you need from a bidder to reveal the information requested. Learn more about the aspects of this stage of a sale process from Paris Aden, the Founder of Valitas Capital Partners, who speaks at the Toronto Business Transitions Forum.
It is essential that confidentiality is maintained throughout any Process. We have advised on many M&A projects and leaks are rare. We have worked on projects where the working group was 100 people including the company personnel and advisors on both sides over several months with no leaks. With the appropriate precautions, we expect that Processes will run smoothly and that confidentiality will be maintained.
Learn about one of the key transactions that inspired how Valitas operates today. Paris Aden, the Founder of Valitas, worked closely with his client, Bob Liew, to sell Island Hearing to unleash the true value potential of his business. As a result, the return on the future earnings of the business exceeded all possible expectations, and the overall value-add of the relationship with Valitas helped Island Hearing achieve their long-term goals as an organization.
Whether you have received a preliminary proposal from a single party who approached you or you’ve received several non-binding bids through a structured auction process, the nature of the process changes from proactive to reactive as due diligence progresses. Ultimately, each bidder will have different due diligence requirements and the onus is on the seller to satisfy those requirements (or not). The due diligence stage is the acquirer’s opportunity to investigate the business from top to bottom. Although difficult, it is essential to maintain control of the process, despite your reactive position during this phase of the process.
It is a common fallacy that an exclusively negotiated deal is faster, easier and quieter than a structured process. In reality, the acquirer with exclusivity rarely moves with urgency, often extending due diligence and dramatically reducing the likelihood of closing at the agreed price, if at all.
In every sale transaction, there is a “window of vulnerability” for the seller that starts with the initiation of sale discussions with a potential buyer and ends with the closing of the sale. This article discusses three inevitable risks that a seller will encounter in an M&A transaction.
Rather than simply selecting the lowest priced advisor, it is critical for sellers to conduct rigorous due diligence when making this important decision. This includes reference checks with previous clients, asking about the advisor’s track record with prior transactions and doing desktop research on multiple advisors. In fact, there isn’t one single industry standard, and fees vary by structure, size and terms. To gain additional perspective on this topic, we spoke to John Carvalho, President of Divestopedia, who shared some of his insights.
Are you thinking about selling your business now or in the near future? As business owners, you need to consider the types of buyers that are in the market, how those buyers perceive value and the advantages and disadvantages associated with each. Learn about these buyers through explanation and the real-life scenario provided practical application.
Conditions in the credit markets are at an all-time high for borrowers. Increasing capital is available for growth, acquisitions, and shareholder liquidity. For companies in the Canadian middle market, information on the type, amount, and terms associated with the capital is nearly impossible to find. Running a competitive financing process and canvassing a deep pool of lenders is the best way to surface the outlier proposal that optimizes your liquidity and flexibility from debt. However, executing a competitive tender can sideline a finance team for 5 months. What is one to do?
A proactive acquisition strategy is not a new concept for private equity or strategic buyers, but it may be an unexplored option for small or mid-market businesses that want to break through to become a more dominant players in their industry. To achieve this growth, an Acquisition Program that uncovers passive sellers at reasonable valuations works in concert with conventional sourcing strategies and can produce significant strategic and financial benefits. The benefits of developing a pipeline of proprietary acquisitions are manifested through superior valuations, strategic choice and increased activity levels.
Acquisitions are complex, which is why they fail more often than not. Pre-acquisition due diligence is only half of the battle; the other half is the hands-on, strategic integration of the acquired company. As this report from the Harvard Business Review puts it, “the success or failure of an acquisition lies in the nuts and bolts of integration.” With these integration challenges in mind, Valitas circled up with Todd Blair, founder & managing partner of GrowthPoint, to discuss post-acquisition areas of focus for companies aiming to achieve their growth goals
We often hear business owners say, “A competitor just approached me about buying my business. I’ll just sit down with him and cut a deal.” The assumption is that this approach will be quick, easy and quiet. It rarely works out that way. Although successful transactions ultimately close with a single buyer (and are, hence, exclusive), only under unusual circumstances is it a best practice to begin the process while entertaining only one potential buyer.
You’ve spent years, decades even, building your business. And along the way, you’ve figured things out, learned from your mistakes and realized success. Now you’re ready to consider an exit strategy; maybe you’re thinking about selling imminently, or in the next five years. You have friends and colleagues who have gone through this. Some have hired M&A advisors, while others opted to do it themselves, as they’ve always done, avoiding advisory fees in the process. What should you do? Does an M&A advisor create tangible value in a sale of business or, given the associated fees and the knowledge you have of your industry, does it make more sense to do it yourself?
This webinar discusses what financial advisors should know about definitive transaction agreements to effectively advise their clients when they are negotiating a sale transaction or a significant private equity financing. The perspectives given in the webinar will include those of (a) the financial advisor, (b) legal counsel, and (c) the R&W insurance carrier.
In this video, Paris talks about his background and elaborates on how his experience at Morgan Stanley and RBC brought him a wealth of expertise and knowledge. Moreover, Paris further explains how Valitas Capital Partners was founded and the firm’s competitive positioning.
In this video, Paris highlights common valuation methods as well as key qualitative factors. It is important to assess the field of bidders, potential synergies in the context of different strategic rationales, as well as general market conditions to determine a risk assessment of the fundamentals of the company. As an example, Paris explains in detail about the Petro-Canada and Suncor deal.
In this video, Paris explains the typical M&A process from start to finish. He highlights the pitching component as the most exciting step and how a hostile bid impacts the entire timeline. Furthermore, he also discusses the importance of preparing clients for hostile approaches, which includes knowing who the potential suitors are as well as having an intrinsic understanding of the client firm’s valuation. Investment bankers and the legal team are called on to assess and evaluate the offer.
In this video, Paris takes a deeper dive into hostile bids, the respective preparation needed, as well as the ladder steps in the M&A timeline. He specifically highlights the importance of developing an understanding of the client company’s valuation and the preparation of due diligence and marketing materials. In addition, Paris elaborates on the assessment process of potential strategic and financial bidders, as well as the deal structure for friendly offers versus unsolicited bids.
In this video, Paris explains the main drivers of M&A activity. Common reasons may include achieving scale, cutting costs, and most importantly, capital synergies that can help unleash value. Specifically, companies with a larger scale are able to unlock value through increased buying power and the ability to high-grade projects, as well as by making more strategic prioritizations and expanding their project portfolio.
In this video, Paris comments on the current state of the M&A market (2010's) as well as capital market forecasts. Specifically, Paris highlights the incredible amount of liquidity in the market that drove valuations much higher. The private equity market has also ballooned dramatically in the past 10 years with approximately US$500B of uninvested private equity. In Canada, there are large pension funds competing on a global scale, and from a macro standpoint, there is still plenty of slack in the economy making it difficult for interest rates to experience a dramatic climb. Overall, with the high valuations and the availability of financing, the M&A market has an optimistic future ahead.
From the moment you make initial contact with any potential bidder to the time you close a sale transaction there is a window of vulnerability where you and your business are exposed to three inevitable risks: completion risk, valuation risk, damage to your business by potential bidders. A key objective of any effective sale process is to shorten this window of vulnerability as much as possible. The following outlines effective strategies to mitigate all three of these risks and execute an M&A process that exposes your business to potential bidders for the shortest length of time possible
Transitioning the ownership of your business is a significant undertaking that requires help from key members of your management team. As your sale process progresses, buyer due diligence will become more broad and the number of people on your internal deal team will increase.
In this Excel file, you will find supporting calculations for the examples shown in the related webinar titled “How Do I Triple the Value of My Business by the end of 2025?”, hosted by our Founder and 2019 TEC Canada Rookie of the Year, Paris Aden. The concepts covered include the Weighted Average Cost of Capital, several examples of value creation opportunities, and the impact of certain assumptions on the value of your business.
Maximizing the value of the business is an imperative for any business owner. The need for value creation is accentuated by the fact that for most owners, the majority of their net worth is tied to their business, which is by nature a risky and illiquid asset. Our founder, Paris Aden, hosted the interactive webinar titled “How Do I Triple the Value of My Business by the end of 2025?” and within this accompanying presentation, you will find explanations of concepts such as the Economic Value-Added model, as well as several examples of specific steps you can take now to select high-growth, quality projects and maximize the value of your business over time.
In this interactive session, Paris Aden, our Founder provided attendees with actionable insights surrounding:
- How to apply the Economic Value Added (EVA) model to your business
- How to identify concrete steps you can take now to dramatically increase your business value over time
- Three examples of tripling shareholder value: footprint expansion, acquisitions, and expanding the sales force.
Far too many business sale attempts fail. Estimates of the failure rate range from 50% to higher than 75% and tend to correlate inversely with the size of the business. Assessing the saleability of your business is an essential first step on the path to successfully realizing its value. It helps you objectively assess the likelihood that your business will be sold if you embark on the process and mitigate the risk of failure.
Learn about one of the key transactions that inspired how Valitas operates today. Paris Aden, the Founder of Valitas, worked closely with his client, Bob Liew, to sell Island Hearing to unleash the true value potential of his business. As a result, the return on the future earnings of the business exceeded all possible expectations, and the overall value-add of the relationship with Valitas helped Island Hearing achieve their long-term goals as an organization.
A growing universe of financial buyers has been effectively competing with strategic buyers on valuation, along with a proliferation of intermediaries that are continually extending their reach into an ever-broader buyer universe. As a result, more businesses are being sold in highly competitive auctions and proprietary deal flow is becoming increasingly challenging. A structured, proactive acquisition program delivers superior results in this environment.
Developing the capability to realize the benefits of proprietary acquisitions is laden with challenges, including the commitment of substantial resources and the strategic alignment across the organization. Bearing that in mind, a reliable and comprehensive framework is invaluable in developing and implementing a state-of-the-art, proactive acquisition program which ensures that resources are adequately managed, and results maximized.
A successful acquisition can create significant shareholder value. However, a positive outcome is not inherent in the acquisition process, and it depends on the development of core competencies necessary to align an organization’s capabilities with its desire for proprietary acquisitions. The inevitable risks associated with the acquisition process can be considerably mitigated by the application of external, purpose-built resources.
A systematic, proactive acquisition strategy that surfaces passive sellers at reasonable valuations works in concert with conventional sourcing strategies and can produce significant strategic and financial benefits. The benefits of developing a pipeline of proprietary acquisitions are manifested through superior valuations, strategic choice and increased activity levels. In this section, we address some of the questions that strategic acquirers may have when making decisions concerning proprietary acquisitions.
It is uncommon for a business to be opportunity constrained. Often, the issue is not having high-return projects to invest in but choosing which to fund. This is a capital-constrained situation. Equally important is choosing how to fund those projects. The cheapest and most expedient option would be to use cash on hand, but this limits the possible pace of investments. When you have more opportunities than capital, do you forgo quality opportunities, raise equity, or arrange for more debt?
Conditions in the credit markets are at an all-time high for borrowers. Increasing capital is available for growth, acquisitions, and shareholder liquidity. For companies in the Canadian middle market, information on the type, amount, and terms associated with the capital is nearly impossible to find. Running a competitive financing process and canvassing a deep pool of lenders is the best way to surface the outlier proposal that optimizes your liquidity and flexibility from debt. However, executing a competitive tender can sideline a finance team for 5 months. What is one to do?
A proactive acquisition strategy is not a new concept for private equity or strategic buyers, but it may be an unexplored option for small or mid-market businesses that want to break through to become a more dominant players in their industry. To achieve this growth, an Acquisition Program that uncovers passive sellers at reasonable valuations works in concert with conventional sourcing strategies and can produce significant strategic and financial benefits. The benefits of developing a pipeline of proprietary acquisitions are manifested through superior valuations, strategic choice and increased activity levels.
Acquisitions are complex, which is why they fail more often than not. Pre-acquisition due diligence is only half of the battle; the other half is the hands-on, strategic integration of the acquired company. As this report from the Harvard Business Review puts it, “the success or failure of an acquisition lies in the nuts and bolts of integration.” With these integration challenges in mind, Valitas circled up with Todd Blair, founder & managing partner of GrowthPoint, to discuss post-acquisition areas of focus for companies aiming to achieve their growth goals
In this article, the first in a two-part series, Paris Aden, partner and founder of Valitas Capital Partners, a boutique M&A advisory firm in Toronto, examines the benefits of hiring an advisory team to do sell-side due diligence before going to market. In the second part, we’ll look at the benefits of doing your due diligence on potential bidders once you’ve gone to market.
In the first part of our two-part series, Paris Aden, partner and co-founder of Valitas Capital Partners, a boutique advisory firm, discussed the benefits of hiring an advisory team to do sell-side due diligence before going to market. In this second part, Paris sits down with The DealRoom to offer some insights on how the seller should approach their own due diligence on bidders once they’ve gone to market.
That dollar figure, whether written on a napkin over coffee or floated in a conversation, is not a binding offer. Any potential acquirer will need to conduct a due diligence investigation before they can enter into a definitive agreement to buy your business. Initial indications can be tactically inflated to ensure the acquirer gains access to your confidential information after which this price is systematically reduced, citing negative findings during due diligence—also known as the due diligence grind. There are a number of strategies to neutralize this tactic.
The development and implementation of communication principles, strategies and protocols are essential to protect your company and its stakeholders from leaks regarding the existence of any process that could result in a sale of your business. These communication protocols are also intended to protect your commercially sensitive information from both current and potential competitors. The protection of your confidential information requires a comprehensive strategy that addresses many potential scenarios.
It’s uncommon for a business to be opportunity constrained. Often, the issue isn’t having profitable projects to invest in, but choosing which to fund. We call this being capital constrained. Equally as important is choosing how to fund those projects. The cheapest and most expedient option would be to use cash on hand, but this limits the pace of investments possible. When you need to bring in outside capital, should you choose equity or debt?
As you move further along in the M&A process, there appears to be an escalation of disclosure, which raises a question of what exactly you need from a bidder to reveal the information requested. Learn more about the aspects of this stage of a sale process from Paris Aden, the Founder of Valitas Capital Partners, who speaks at the Toronto Business Transitions Forum.
It is essential that confidentiality is maintained throughout any Process. We have advised on many M&A projects and leaks are rare. We have worked on projects where the working group was 100 people including the company personnel and advisors on both sides over several months with no leaks. With the appropriate precautions, we expect that Processes will run smoothly and that confidentiality will be maintained.
Whether you have received a preliminary proposal from a single party who approached you or you’ve received several non-binding bids through a structured auction process, the nature of the process changes from proactive to reactive as due diligence progresses. Ultimately, each bidder will have different due diligence requirements and the onus is on the seller to satisfy those requirements (or not). The due diligence stage is the acquirer’s opportunity to investigate the business from top to bottom. Although difficult, it is essential to maintain control of the process, despite your reactive position during this phase of the process.
It is a common fallacy that an exclusively negotiated deal is faster, easier and quieter than a structured process. In reality, the acquirer with exclusivity rarely moves with urgency, often extending due diligence and dramatically reducing the likelihood of closing at the agreed price, if at all.
In every sale transaction, there is a “window of vulnerability” for the seller that starts with the initiation of sale discussions with a potential buyer and ends with the closing of the sale. This article discusses three inevitable risks that a seller will encounter in an M&A transaction.
Rather than simply selecting the lowest priced advisor, it is critical for sellers to conduct rigorous due diligence when making this important decision. This includes reference checks with previous clients, asking about the advisor’s track record with prior transactions and doing desktop research on multiple advisors. In fact, there isn’t one single industry standard, and fees vary by structure, size and terms. To gain additional perspective on this topic, we spoke to John Carvalho, President of Divestopedia, who shared some of his insights.
Are you thinking about selling your business now or in the near future? As business owners, you need to consider the types of buyers that are in the market, how those buyers perceive value and the advantages and disadvantages associated with each. Learn about these buyers through explanation and the real-life scenario provided practical application.
We often hear business owners say, “A competitor just approached me about buying my business. I’ll just sit down with him and cut a deal.” The assumption is that this approach will be quick, easy and quiet. It rarely works out that way. Although successful transactions ultimately close with a single buyer (and are, hence, exclusive), only under unusual circumstances is it a best practice to begin the process while entertaining only one potential buyer.
You’ve spent years, decades even, building your business. And along the way, you’ve figured things out, learned from your mistakes and realized success. Now you’re ready to consider an exit strategy; maybe you’re thinking about selling imminently, or in the next five years. You have friends and colleagues who have gone through this. Some have hired M&A advisors, while others opted to do it themselves, as they’ve always done, avoiding advisory fees in the process. What should you do? Does an M&A advisor create tangible value in a sale of business or, given the associated fees and the knowledge you have of your industry, does it make more sense to do it yourself?
This webinar discusses what financial advisors should know about definitive transaction agreements to effectively advise their clients when they are negotiating a sale transaction or a significant private equity financing. The perspectives given in the webinar will include those of (a) the financial advisor, (b) legal counsel, and (c) the R&W insurance carrier.
In this video, Paris talks about his background and elaborates on how his experience at Morgan Stanley and RBC brought him a wealth of expertise and knowledge. Moreover, Paris further explains how Valitas Capital Partners was founded and the firm’s competitive positioning.
In this video, Paris highlights common valuation methods as well as key qualitative factors. It is important to assess the field of bidders, potential synergies in the context of different strategic rationales, as well as general market conditions to determine a risk assessment of the fundamentals of the company. As an example, Paris explains in detail about the Petro-Canada and Suncor deal.
In this video, Paris explains the typical M&A process from start to finish. He highlights the pitching component as the most exciting step and how a hostile bid impacts the entire timeline. Furthermore, he also discusses the importance of preparing clients for hostile approaches, which includes knowing who the potential suitors are as well as having an intrinsic understanding of the client firm’s valuation. Investment bankers and the legal team are called on to assess and evaluate the offer.
In this video, Paris takes a deeper dive into hostile bids, the respective preparation needed, as well as the ladder steps in the M&A timeline. He specifically highlights the importance of developing an understanding of the client company’s valuation and the preparation of due diligence and marketing materials. In addition, Paris elaborates on the assessment process of potential strategic and financial bidders, as well as the deal structure for friendly offers versus unsolicited bids.
In this video, Paris explains the main drivers of M&A activity. Common reasons may include achieving scale, cutting costs, and most importantly, capital synergies that can help unleash value. Specifically, companies with a larger scale are able to unlock value through increased buying power and the ability to high-grade projects, as well as by making more strategic prioritizations and expanding their project portfolio.
In this video, Paris comments on the current state of the M&A market (2010's) as well as capital market forecasts. Specifically, Paris highlights the incredible amount of liquidity in the market that drove valuations much higher. The private equity market has also ballooned dramatically in the past 10 years with approximately US$500B of uninvested private equity. In Canada, there are large pension funds competing on a global scale, and from a macro standpoint, there is still plenty of slack in the economy making it difficult for interest rates to experience a dramatic climb. Overall, with the high valuations and the availability of financing, the M&A market has an optimistic future ahead.
From the moment you make initial contact with any potential bidder to the time you close a sale transaction there is a window of vulnerability where you and your business are exposed to three inevitable risks: completion risk, valuation risk, damage to your business by potential bidders. A key objective of any effective sale process is to shorten this window of vulnerability as much as possible. The following outlines effective strategies to mitigate all three of these risks and execute an M&A process that exposes your business to potential bidders for the shortest length of time possible
Transitioning the ownership of your business is a significant undertaking that requires help from key members of your management team. As your sale process progresses, buyer due diligence will become more broad and the number of people on your internal deal team will increase.
