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Equicapita - Who will buy these businesses? - October 2013
Equicapita - Who will buy these businesses? - October 2013
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Equicapita - Who will buy these businesses? - October 2013

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Equicapita is a Calgary-based private equity fund focusing on acquiring Canadian SMEs that can generate sustainable cash flow from their operations in niche markets. Equicapita generally seeks to …

Equicapita is a Calgary-based private equity fund focusing on acquiring Canadian SMEs that can generate 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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  • 1. Equicapita Asks “Who Will Buy Baby Boomer Businesses Representing 15% of Canada’s Economy?” FOR IMMEDIATE RELEASE, ATTENTION INVESTMENT EDITORS – October 11, 2013 - Calgary In a recent report CBC estimated that “$1.9 trillion in business assets are poised to change hands in five years — the biggest transfer of Canadian business control on record.” The CBC went on to state, “by 2022, this number will mushroom to at least $3.7 trillion as 550,000 owners exit their businesses. Given this magnitude, a faulty or badly executed succession planning process could have a ripple effect throughout the Canadian economy via reduced productivity, job losses, premature sales and increased bankruptcy rates...” Baby boomer companies “that will see a change ownership in the next five years currently employ close to two million people and account for at least 15 per cent of gross domestic product.” Greg Tooth, a partner at private equity buy-out fund Equicapita, reports "The need for baby boomers to sell their businesses to fund retirement is a financial issue that has received limited media attention to date. However, we believe it could be poised to become one of the most pressing economic challenges facing the Canadian economy. The amount of capital in the Canadian private equity market is dwarfed by the magnitude of the value of assets that will be seeking new owners. While private equity transactions are measured in billions of dollars annually in Canada, the estimates are for trillions of dollars of baby boomer business assets to be seeking buyers over the next decade. This supply/demand mismatch is particularly pronounced for businesses with values in the $2 million to $20 million range – the nano-gap. New approaches to bring capital and investors into the nano-gap market are an important part of solution.” Equicapita is a Calgary-based buy-out fund focusing on acquiring Canadian private businesses that can generate sustainable cash flow from their operations. Equicapita generally seeks to acquire businesses: - at what it believes are reasonable prices; - with a demonstrated history of cash flow between $1 million to $5 million per annum; - with a durable competitive advantage; - that operate in industries that it believes have sound long-term macro prospects; - with ongoing participation of senior personnel;
  • 2. - with the ability to maintain the cash flow without disproportionate amounts of new capital; - where it 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. Equicapita believes that there are compelling reasons for making private equity investments in the Canadian small medium enterprise (“SME”) market including: - Generational opportunity to acquire “baby boomer” SMEs: There is a demographic opportunity to capitalize on the accelerating turnover of baby boomer owned, western Canadian SMEs. According to CIBC “An estimated $1.9 trillion in business assets are poised to change hands in five years — the biggest transfer of Canadian business control on record.” - Attractive target market: There is a private equity funding gap in the $2 to $20M range - often referred to as the “nano gap” – that creates an attractive environment to acquire reasonably priced, stable cash flow streams. This news release may contain certain information that is forward looking and, by its nature, such forward-looking information is subject to important risks and uncertainties. The words "anticipate," "expect," "may," "should" "estimate," "project," "outlook," "forecast" or other similar words are used to identify such forward looking information. Those forward-looking statements herein made by Equicapita, if any, reflect Equicapita's beliefs and assumptions based on information available at the time the statements were made. Actual results or events may differ from those anticipated or predicted in these forward-looking statements, and the differences may be material. Factors which could cause actual results or events to differ materially from current expectations include, among other things: risks associated with the ownership and operation of businesses, including fluctuations in interest rates; general economic conditions; supply and demand for businesses; competition for available businesses; changes in legislation and the regulatory environment; and international trade and global political conditions. Readers are cautioned not to place undue reliance on any forward-looking information contained in this news release (if any), which is given as of the date it is expressed herein. Equicapita undertakes no obligation to update publicly or revise any forward-looking information, whether as a result of new information, future events or otherwise.

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