Q-News
July 2010
Posted in Mike's Commentary
I guess I’m a good example of the old proverb about the shoemaker's children. While my firm has been busy selling our
client’s businesses we simply haven’t spent enough time selling ourselves. During the past month I’ve had a number of
meetings with companies and individuals who were not fully aware of the fact
that Q1 Capital is almost entirely focused on providing M&A advisory
services to private Canadian companies looking to monetize the value of their
businesses. As with many of the successful
companies that we work with, we have changed and adapted our business model to
meet the challenges and opportunities presented by the North American capital
markets. Where we were once focused
entirely on raising capital for technology companies from Canadian and US venture
capitalists, in early 2006 we anticipated the decline in VC investment capital
and transitioned our business model to the active and important M&A
advisory component of the capital markets.
The core values and concepts of our business remain the
same – provide an all encompassing offering to our clients whereby they focus
on operating their businesses through the sale process while we: tackle the job
of preparing the company for a sale transaction; complete preliminary due diligence
and create a Confidential Business Review; identify, contact and engage potential
acquirers; manage the process; work with the entrepreneur/owner to select the
best acquirer; negotiate the transaction
on behalf of our client; and work with the lawyers and accountants to close the
transaction at the best valuation and under terms and conditions that satisfy
our client’s needs. We strongly believe
that, particularly in these challenging economic times, business operators must
maintain the momentum of their businesses in order to attract the maximum value
for their years of effort and cannot afford to allow themselves to lose focus
by running their own sale process.
Certainly, the high-touch approach to working with our clients
has been very successful.
Strategically identifying potential buyers who would
understand the value of our client’s business and be willing to pay a premium
just makes sense to us. Blasting out
emails to every Tom, Dick and Harry who registered at last year’s ABC Sector
Trade Show or relying on a disparate group of individuals in a franchise
network strikes us as a waste of time with virtually zero chance of finding a
qualified buyer who will pay a premium for our client.
We believe the fact that we have been able to attract interested
parties and bidders for our client’s businesses from not only Canada and the US
but also Europe, Asia and Latin America goes a
long way to increasing the value of the exit and validates the strength of our
business model. While technology or
tech-centric companies have represented the bulk of our clients, we have been
expanding our focus to include traditional, non-tech businesses because we have
found that the same strategic thinking that has allowed us to identify and
capitalize on the intrinsic value of our tech clients can also be applied to
traditional businesses in ways that many of your competitors seldom
contemplate. Lastly, it is important to
note that we are very selective as to who we work with and only engage in
mandates with companies that we believe in and in which we are confident there
is a high probability of success.
In addition to the mandates that we are currently working
on we have been approached by a number of companies and private equity firms
who have asked us to keep an eye out for interesting companies that are
established, have a record of profitability and predictable revenues and are
looking to sell. Current sectors of
interest include manufacturing and food processing. We have also been asked by a well-known US social media company to identify and engage
Toronto-based companies in the digital media space who may be interested in
being acquired as part of the US
firm’s aggressive roll-up strategy.
We have certainly not abandoned the financial advisory side
of our business but we are being particularly selective in who we work
with. We continue to have great
relationships with most of Canada’s venture capitalists and many of the
important and relevant VCs in the US but capital constraints, cross border
issues and a decreasing number of truly active participants means that we can
only work with those companies to whom we can bring the most value and who we
believe have the highest probability of being successful in attracting capital
and in building a vibrant and thriving businesses.
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