• TSX +22.69(Reuters)
• DOW -11.11
• Dollar -.31c to 94.83cUS
• Oil +$.44to $79.58US per barrel.
• Gold +$1.90 to $1,140.70USD per ounce
'Everything for sale at a price'
Rick Spence, Financial Post
Maybe there are just two types of entrepreneurs: those who stand ready to sell their companies at a moment's notice, and those who think of their businesses as intensely personal achievements, fused to their skills, their self-image, and their hopes and dreams.
Both types showed up at an all-star business panel in Toronto last week organized by WXN, the Women's Executive Network, to discuss the buying and selling of businesses. The participants included two brawlers from the hit TV series, Dragons' Den, Kevin O'Leary and Robert Herjavec, and two award-winning women entrepreneurs: Teresa Cascioli, former CEO of Lakeport Brewing, and Rebecca MacDonald, founder of the fixed-price utility giant Just Energy.
The panel started off by noting how timely the topic is. "This is a phenomenal time to be in the market," said MacDonald, whose company made an acquisition just three months ago. "I have never seen more distress sales than I'm seeing today. If you've got cash, prices are low and it's time to buy."
O'Leary, who introduced himself as one of Just Energy's biggest shareholders through his O'Leary mutual funds, demonstrated his contrarian nature by questioning Mac-Donald's thesis. "Maybe those aren't distressed values," he said. "Maybe they're realistic values given today's market."
Many companies "kill shareholder value," he added, when they acquire other businesses that don't immediately boost the buyers' income statements. "What's important is free cash flow," he maintained. "If I buy my competitor's business, will I generate more cash than I had without it? That's the only question that matters."
As he often does on TV, Herjavec challenged O'Leary's assertion. The founder of computer-security company Herjavec Group said he had just closed a deal that cashes in on the same tough times Mac-Donald cited. "We bought a $15-million company with no money down, based on their own cash flow," he said. "If I had approached this guy with this deal three years ago, he would have laughed at me."
What matters, said Herjavec, isn't just cash, but whether the deal will give his company more market coverage and access to additional customers.
Having turned around troubled Lakeport Brewing of Hamilton prior to selling it to Labatt in 2007, Cascioli sided with the sellers. Her advice to entrepreneurs: "If you're selling, hold out. If you can ride out [the current downturn], you will get more money tomorrow than you'll get today."
But the fireworks really began when O'Leary advised the entrepreneurs in the audience to consider their business as being on the market at all times. "When someone wants to buy your business, sell it to them." (Assuming they're offering cash, that is. O'Leary thinks taking stock in return for your shares is like betting against your own horse.)
"Go take the cash and pursue some other opportunity," O'Leary advised. "Taking a business liquid again is a rare opportunity."
"Everything is for sale, at a price," MacDonald agreed. Her own experience shows it's smart to entertain all offers. She sold a previous business after some hardball negotiations with a foreign buyer. Imagine her delight when she got the cheque and found that while she had been thinking in dollars, her buyer had been negotiating in pounds sterling!
But again Herjavec disagreed. "I would rather invest in other companies than sell mine," he said. "I'm an operator. Starting a business from zero is hard. I don't think I want to do that again."
This time MacDonald took Herjavec on. "Kevin and I don't agree on a lot," she said. "But we agree that if you are not willing to sell your business, you don't have a business. You have a hobby."
Cascioli went even further. "If you don't want to sell your business, there's something wrong with you. If you are so passionate that you are going to stay there forever, you are devaluing your business."
Herjavec agreed that when there's an offer, you have to look at it: "You owe it to your family." But it was clear where his heart lies: "I like to build businesses. I like to grow them." Not constantly trade them in for something shinier.
Before the panel ended, O'Leary offered one more insight: Buyer beware. His former firm, The Learning Co., bought 35 companies in its successful campaign to consolidate the educational software market. In making deals, he said, "I make the assumption going in that everyone's lying to me." His rule of thumb: after he and his team estimate the value of an acquisition, based on the data available, they pore over all the documents. If they believe the company is likely to underperform their projections by 20% or less, they'll sign the deal. But if the shortfall is a nickel over 20%, they'll walk away.
In an interview after the panel, O'Leary clarified a point: "It's not really that they're lying," he said. "They're just over-optimistic about their prospects -- 100% of the time."
Thursday, November 19, 2009
Wednesday, November 18, 2009
Financial Update For Nov. 18, 2009
Rapid rebound fuels fears of housing bubble
• TSX +117.74(Reuters) up for the 3rd day in a row as nine of its 10 main groups were higher
• DOW +30.46
• Dollar -.36c to 95.14cUS
• Oil +$.24to $79.14US per barrel.
• Gold +$.20 to $1,138.80USD per ounce
OTTAWA (Reuters) - Canadian CPI-consumer price index rose on an annual basis in October for the first time since May due to less downward pressure on gasoline prices and rising food and household costs, Statistics Canada said on Wednesday. The consumer price index slipped 0.1 percent for the month but climbed 0.1 percent in the 12-month period. It was the first positive reading after four months of deflation but still below market expectations of a 0.3 percent gain.
Rapid rebound fuels fears of housing bubble
Garry Marr, Financial Post
Canadian existing home prices are now rising at a pace not seen in 20 years, fueling talk that a bubble may be forming in the market.
The average price of a home sold last month was $341,079, a 20.7% increase from a year ago, the Ottawa-based Canadian Real Estate Association said Monday. Sales also continued to climb with 42,288 units trading hands, a 41% jump from October, 2008.
At the same time that demand continues to surge and interest rates remain at historic lows, supply remains critically low. New listings last month in the country's 25 largest market were off 16% from a year ago.
"I don't think it's a bubble yet," said Doug Porter, an economist with Bank of Montreal. "The rapid-fire rebound in Canadian housing is showing no sign of letting up. While that may be causing some sweaty palms among bubble-phobes, the quick turn is a vivid illustration that monetary policy still works in this country."
Mr. Porter says large markets are skewing average prices, creating a national picture that might seem more buoyant than it is in reality. Toronto, the largest market in the country, saw a 20% increase in price last month from year ago. In Vancouver, the most expensive market in the country, sales were up 170.8% from a year ago.
"There is a little bit of magic in the way they put these numbers together," said Mr. Porter,
Derek Holt, senior vice-president of economics at Scotia Capital, called what's happening in the marketplace today a once in a lifetime situation. He says record low interest rates, tight supply, a favourable lending environment and government stimulus program have all helped stir the housing pot.
"It's more the medium term, two three years, where we could get into headaches potentially," said Mr. Holt. questioning whether consumers buying today are ready for interest rates that could be three to four percentage points higher by 2011.
Real estate author Garth Turner said the latest figures prove his thesis that Canada is now in a real estate bubble. "We got this type of growth in sales and prices in the middle of a recession. The latest GDP numbers show the economy actually contracted," says Mr. Turner.
A new study from the Canadian Association of Accredited Mortgage Professionals released yesterday shows Canadians are benefitting from the lower interest rates. The average mortgage rate negotiated in the past year was 4.55%, a decline from 5.41% a year ago.
"Clearly people are thinking the worst is behind us and that comes as we have record low rates," said Jim Murphy, president of CAAMP. "If rates were to spike dramatically, there could be some concern but we just don't see that."
Gregory Klump, chief economist with CREA said while the latest numbers appear dramatic they have to be kept in context. "Activity in the early part of 2009 had fallen to a decade low. With improvement in consumer confidence and interest rates, sales activity was expected to respond.," he said.
Mr. Klump suggested prices will ease up as seller's start to take advantage of higher prices. However, CREA is now predicting prices will rise 4.2% this year after suggesting they would only increase by 1.5%.
Michael Polzler, executive vice president of Re/Max Ontario-Atlantic Canada Inc., said he's been expecting these type of price increases. "Last year at this time, everything just stopped. They were very realistic example of where everything was it," he said. "Now we are just back to kind of normal. You are going to see these type of numbers continues into the spring because we are comparing them to last year."
• TSX +117.74(Reuters) up for the 3rd day in a row as nine of its 10 main groups were higher
• DOW +30.46
• Dollar -.36c to 95.14cUS
• Oil +$.24to $79.14US per barrel.
• Gold +$.20 to $1,138.80USD per ounce
OTTAWA (Reuters) - Canadian CPI-consumer price index rose on an annual basis in October for the first time since May due to less downward pressure on gasoline prices and rising food and household costs, Statistics Canada said on Wednesday. The consumer price index slipped 0.1 percent for the month but climbed 0.1 percent in the 12-month period. It was the first positive reading after four months of deflation but still below market expectations of a 0.3 percent gain.
Rapid rebound fuels fears of housing bubble
Garry Marr, Financial Post
Canadian existing home prices are now rising at a pace not seen in 20 years, fueling talk that a bubble may be forming in the market.
The average price of a home sold last month was $341,079, a 20.7% increase from a year ago, the Ottawa-based Canadian Real Estate Association said Monday. Sales also continued to climb with 42,288 units trading hands, a 41% jump from October, 2008.
At the same time that demand continues to surge and interest rates remain at historic lows, supply remains critically low. New listings last month in the country's 25 largest market were off 16% from a year ago.
"I don't think it's a bubble yet," said Doug Porter, an economist with Bank of Montreal. "The rapid-fire rebound in Canadian housing is showing no sign of letting up. While that may be causing some sweaty palms among bubble-phobes, the quick turn is a vivid illustration that monetary policy still works in this country."
Mr. Porter says large markets are skewing average prices, creating a national picture that might seem more buoyant than it is in reality. Toronto, the largest market in the country, saw a 20% increase in price last month from year ago. In Vancouver, the most expensive market in the country, sales were up 170.8% from a year ago.
"There is a little bit of magic in the way they put these numbers together," said Mr. Porter,
Derek Holt, senior vice-president of economics at Scotia Capital, called what's happening in the marketplace today a once in a lifetime situation. He says record low interest rates, tight supply, a favourable lending environment and government stimulus program have all helped stir the housing pot.
"It's more the medium term, two three years, where we could get into headaches potentially," said Mr. Holt. questioning whether consumers buying today are ready for interest rates that could be three to four percentage points higher by 2011.
Real estate author Garth Turner said the latest figures prove his thesis that Canada is now in a real estate bubble. "We got this type of growth in sales and prices in the middle of a recession. The latest GDP numbers show the economy actually contracted," says Mr. Turner.
A new study from the Canadian Association of Accredited Mortgage Professionals released yesterday shows Canadians are benefitting from the lower interest rates. The average mortgage rate negotiated in the past year was 4.55%, a decline from 5.41% a year ago.
"Clearly people are thinking the worst is behind us and that comes as we have record low rates," said Jim Murphy, president of CAAMP. "If rates were to spike dramatically, there could be some concern but we just don't see that."
Gregory Klump, chief economist with CREA said while the latest numbers appear dramatic they have to be kept in context. "Activity in the early part of 2009 had fallen to a decade low. With improvement in consumer confidence and interest rates, sales activity was expected to respond.," he said.
Mr. Klump suggested prices will ease up as seller's start to take advantage of higher prices. However, CREA is now predicting prices will rise 4.2% this year after suggesting they would only increase by 1.5%.
Michael Polzler, executive vice president of Re/Max Ontario-Atlantic Canada Inc., said he's been expecting these type of price increases. "Last year at this time, everything just stopped. They were very realistic example of where everything was it," he said. "Now we are just back to kind of normal. You are going to see these type of numbers continues into the spring because we are comparing them to last year."
Tuesday, November 17, 2009
Financial Update For Nov. 17, 2009
Variable-Rate Mortgages: 3- or 5-Year?
• TSX +104.58 (Reuters)
• DOW -+136.49
• Dollar +.31c to 95.50cUS
• Oil +$2.56 to $78.90US per barrel.
• Gold +$22.50 to $1,138.60USD per ounce
• TSX +104.58 (Reuters)
• DOW -+136.49
• Dollar +.31c to 95.50cUS
• Oil +$2.56 to $78.90US per barrel.
• Gold +$22.50 to $1,138.60USD per ounce
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