Last time we discussed how buyers of businesses assess vendor motivation. I also checked in with several experienced merger and acquisition advisors for their tips and experiences on how to assess a seller’s level of motivation.Continue Reading
I was recently involved in an acquisition transaction that fell apart at the altar. In this case, the seller ultimately did not honour commitments he made at the letter of interest stage. There are only two possible explanations — either he didn’t understand those commitments, or he had a change of heart. Continue Reading
Part 2: Sustainability and Alignment
Last time, we explored the importance of capacity and how lenders measure this. In addition to a company’s capacity to repay its debts, capital providers also measure leverage. Leverage ratios express a company’s total liabilities relative to either its assets or its equity base. Such ratios are important for two reasons.
Part 1: Capacity (A Two-Part Series)
Financial covenants (or ratios) are to lenders what blood pressure, cholesterol and BMI are to doctors; they are measures of overall corporate health. Many entrepreneurs don’t understand why these covenants matter, or what their lender is trying to accomplish by testing them. More importantly, they don’t invest the time to understand and negotiate a covenant structure that accurately measures what matters to their business.
An American referral source recently commented to me that he likes doing business in Canada because it is a less competitive market.
Lenders, does this make you nervous? It shouldn’t. Continue Reading