Equicapita - Sell your business now or wait?

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Equicapita is a Calgary-based nano-gap private equity fund focusing on acquiring Canadian SMEs that can generate strong, sustainable cash flow from their operations in niche markets. Equicapita generally seeks to acquire businesses: at what it believes are reasonable prices; with a demonstrated history of free cash flow greater than $1 million per annum; with a durable competitive advantage; that operate in industries that Equicapita believes have sound long-term macro prospects; with ongoing participation of senior personnel; with the ability to maintain the cash flow without disproportionate amounts of new capital; where Equicapita can partner with management and align their interest with Equicapita through tools such as earn-outs, vendor take backs and management incentive plans; to be held for the long term; where there is some potential to grow sustainable free cash flow, but where that growth is not essential to generate suitable returns.

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Equicapita - Sell your business now or wait?

  1. 1. 1Why 2013 May Be A Substantially Better Time To Sell Your Business Than 2018 Why 2013 May Be A Substantially Better Time To Sell Your Business Than 2018 Don’t wait to sell your business, it may prove to be a very costly decision. There are a few key factors that impact the “right time” to sell a business: 1. Economic environment 2. Money characteristics 3. Supply and demand THE DEMOGRAPHIC SHIFT AND HOW IT IMPACTS YOU We are facing a massive demographic shift in Canada and one of the biggest areas that is impacted is the entrepreneurial realm. n The number of Canadians aged 55 to 64 — those most likely to be thinking about retirement — jumped by 28 per cent in the past five years to 3.7 million.2 n The sharp increase can be attributed to Canada’s aging baby boomers, who account for close to one- third of the country’s 32 million people. 2 n By 2011 the first batch of baby boomers will reach 65. 5 n By 2017, the majority will be over 65.5 According to the Canadian Federation of Independent Business: n The number of self-employed, who are nearing retirement (ages 55 to 64) has been rising rapidly in recent years, growing by a whopping 7.5 percent annually since the beginning of the decade. 7 n One-fifth of small business owners (or more than 500,000) are planning to retire within the next five years, and another 30 percent will retire by 2020. That is, within the coming 15 years, more than half of the country’s current small business owners are expected to retire .7 n 37% of SME owners expect to sell their business to an outside party. n 71% of business owners intend to sell their businesses over the next 5 to 10 years, and 41% over the next 5 years. 6 n 300,000 businesses with 5 to 199 employees – translates into approximately $1 trillion in capital required to finance the transition. 6 What this means is that there will be an unprecedented “rush to the exits” over the next 10 years, and an enormous requirement for capital to complete the business transactions. The limiting factor for business owners will be if they wait too long to sell,there will be fewer qualified buyers. Often considered as a best bet scenario to ensure the ongoing success of a family owned business is the transfer to the next generation. However, this is no guarantee for success nor is it a guarantee that the next generation will see the capital they agree on for the business transfer. According to a notable Chartered Accounting firm’s research1, only one-third of family-owned businesses survive the transition to the second generation. And of these businesses, again only one-third will survive to the third generation, meaning that the chances that the founder’s grandchildren will take over the business are merely 1 in 10.
  2. 2. 2Why 2013 May Be A Substantially Better Time To Sell Your Business Than 2018 ABOUT EQUICAPITA Equicapita is a private equity fund that acquires established, private, small and medium sized enterprises (“SMEs”) located primarily in Western Canada. Equicapita’s investment drivers are to acquire operating companies at attractive valuations, with a history of generating sustainable cash flow and proven management teams. Equicapita believes that there is: - a generational opportunity to acquire ‘baby boomer’ SMEs; and - a funding gap in the $2 to $20 million enterprise value range. The retirement of baby boomer business owners has been described as triggering one of the biggest transfers of corporate assets on record in Canada. This creates an environment with an abundance of opportunities to acquire SMEs with long-term operating histories, at attractive cash flow multiples. Equicapita provides investors with access to this alternative asset class via an efficient RRSP eligible structure. DISCLAIMER The information, opinions, estimates, projections and other materials contained herein are provided as of the date hereof and are subject to change without notice. Some of the information, opinions, estimates, projections and other materials contained herein have been obtained from numerous sources and Equicapita and its affiliates make every effort to ensure that the contents hereof have been compiled or derived from sources believed to be reliable and to contain information and opinions which are accurate and complete. However, neither Equicapita nor its affiliates have independently verified or make any representation or warranty, express or implied, in respect thereof, take no responsibility for any errors and omissions which maybe contained herein or accept any liability whatsoever for any loss arising from any use of or reliance on the information, opinions, estimates, projections and other materials contained herein whether relied upon by the recipient or user or any other third party (including, without limitation, any customer of the recipient or user). Information may be available to Equicapita and/or its affiliates that is not reflected herein. The information, opinions, estimates, projections and other materials contained herein are not to be construed as an offer to sell, a solicitation for or an offer to buy, any products or services referenced herein (including, without limitation, any commodities, securities or other financial instruments), nor shall such information, opinions, estimates, projections and other materials be considered as investment advice or as a recommendation to enter into any transaction. Additional information is available by contacting Equicapita or its relevant affiliate directly. There will be many business owners rushing for the exits over the next 10 years. Don’t delay. Now is the time to prepare, think about selling, plan the exit and understand the process. It will take anywhere from 6months to 18 months to prepare your company for sale, identify a purchaser, negotiate a deal, accommodate the purchasers requests in to facilitate the financing, prepare the required documents, and close the deal. 1 BDO Guide to Succession Planning for Family Business

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