An article published today called Earnout trends: balancing buyer and seller interests in “post-closing conduct of the business” covenant provides good “legal” advice on drafting earnout provisions.
As usual this legal advice assumes that legal language is answer to post-closing governance in a business sale. The authors who are lawyers say: “In the absence of provisions regarding buyer’s ability to run the business during the earnout period, there is a heightened risk of post-closing litigation.”
As is typical of the legal profession generally the underlying assumption is that the buyer and seller will take advantage of one another if the legal documentation is not properly drafted. The authors cast their faith in the details of documentary language saying: Continue Reading
The article Setting Aside a Prenuptial Agreement – LeVan v. LeVan neatly summarizes the disclosure requirements in the context of pre-marital contracts in Ontario. Handling this issue requires care when a family business or family farm is in issue.
Although it seems impossible to know when or how to give this advise – it seems that where there are disclosure issues based on a concern of fear of consequences – then one should question the entire premise of the marriage.
In November of 2012 CIBC Bank published a report describing the macroeconomic threat posed by inadequate succession planning. CIBC reported that in Canada, 550,000 businesses with a total value of $3.5 trillion dollars will transfer or transition in the next 10 – 20 years.
There is a lot of marketing by financial institutions who are looking to capture the dollars flowing out of these transfers and transitions. But there is not a lot of good quality guidance available to assist the owner or advisor with how to actually transition a business.
50 Hurdles – Business Transition Simplified is a valuable addition. Lead author Ian R. Campbell has previously authored leading valuation texts accepted as authoritative guidance on the subject of business valuation in many Canadian court cases.
So it is certain that 50 Hurdles emanates from voices of deep experience. The difference however is that Campbell has put in a lot of effort to make the book readable and accessible to business owners and their advisers. You can consider this book as authoritative guidance written in an accessible manner. Based on my own deep interest in the subject I could not put the book down, and read it one sitting. This does not mean 50 Hurdles reads like an Agatha Christie novel, but it is not a formal textbook either.
The fifty hurdles to successful generational business transition discussed in the book each are issues that must be considered along the generational transition path. The book makes the point that a hurdle is an obstruction that you can jump over; whereas a barrier is a wall that stops you. Reading through 50 hurdles will help you identify barriers that may exist in your unique family and business, and in turn may fundamentally dictate your strategic choices. Continue Reading
The article Is now really the “perfect” time to sell a business? offers some important considerations for the owner who is considering selling.
“It seems everywhere you look, valuations are up. All this froth could lead a business owner to say that now is the perfect time to sell. Maybe. But most owners who sell will have to do something with the money, which usually means buying into an equally inflated asset class. ”
For lifestyle requirements, funds should be in low risk or guaranteed investments. Legacy is best dealt with by life insurance.
by Gary P. Pisano
This article contains very practical advice on innovation. The conclusion is:
In creating an innovation strategy, managers should strive to achieve the optimal balance between disruptive and sustaining efforts. There is no magic formula. Young start-ups are not going to beat an Apple or Google at its own game. They need to find an alternative value proposition, and disruptive strategies are likely the only route there. (This is why it makes sense for venture capitalists to obsess about disruption).
But once a company is established, innovation strategy means understanding how to leverage distinctive existing strengths to generate value and capture value. It means understanding how your repertoire of R&D skills, intellectual property, operating capabilities, relationships, distribution channels, and brand can protect and extend the value from innovation.
Collins Barrow has published The “Evils” Of Alternative Minimum Tax. This article is a good summary of the issues arising out of Canada’s alternative minimum tax which is an issue that surprises many: farmers who are selling qualified farm property; and, business owners who are selling qualified small business shares.
This article was originally published in the inFocus Spring ’14 Issue and is reprinted here with permission.
As an entrepreneur either just starting out with a business idea or growing an already established business, it is easy to get buried in the big idea and neglect the administration or business details. Here I highlight three big picture ideas that any entrepreneur should keep in mind.
Working capital in the business is likely to be made up of several components. Effective management of cash and near cash items requires that each component, including the systems surrounding it, be reviewed to ensure that it is used optimally.
For example: Continue Reading
Many business owners who have worked and sacrificed for many decades don’t really know how to spend a lot of money. They may get a larger house or a better car but that only takes you so far.
How big do you go with a house? do you get a staff? and how do you hire a butler anyway?
How big do you go with a car? maintenance becomes a chore – does Canadian Tire change the oil in a Bentley?
Improve the lifestyle yes. But change it completely? No.
The next order of business is the children. Great educations; first homes; start up assistance and helping to finance the grandchild all seems in order. But like the car and the house you can only go so far. Can trust fund babies fend for themselves? One of the big debates among wealth professionals is the use of incentive trusts, but can you really control a child’s life by using some magic words on a piece paper they may never read?
So what then? Continue Reading
Graham Kenney Ph. D. is strategy consultant from Australia. This is chapter one from his book Cracking Strategy’s Code. Graham runs a consulting company called Strategic Factors, the website has a lot of useful resources
Graham’s approach to business strategy is to identify the stakeholder groups: employees; suppliers; customers etc. For each stakeholder group you then identify the strategic factors that add value for that group.
This is a useful exercise.