'Nobody told me there'd be days like these. Strange days indeed.' - lyrics from John Lennon, released in 1983, 3 years after we lost him. With our clients, my Associates and I have had to adapt to these challenging times. We are nonetheless seeing signs of brighter days ahead.
We completed the divestiture of a manufacturing company just a few days before the March 16th announcement by Doug Ford winding down some business activities in Ontario. This public announcement necessitated adjusting the timetables on several other divestiture mandates. The businesses were classified as 'essential' and remained operational, but time was still required to rebuild the revenue ensuring fair enterprise value will be captured in the upcoming sale.
Facilitating the divestiture process itself is not proving to be a problem. Before we ever heard of 'distancing', our company had already completed several transactions with sole reliance on e-mail and conference calls.
We have been reminded, in the harshest way, that Cash is King. Many business owners do not carry enough cash on their balance sheet to weather a storm of this magnitude. Some are now refinancing - fortunately, interest rates are low. We are also seeing some of our clients reconfiguring their businesses to be stronger than ever:
The Months Ahead
Over the last decade, 90% of the new jobs created in Canada have been generated from companies with less than 100 employees. Our government will continue to pour money into assistance unlike we have ever seen before.
Business owners will still need to adapt. Service businesses will recover more quickly. Manufacturing companies may need more space with production facilities to accommodate the new realities of 'distancing'.
Half the owners of mid-sized businesses in Canada have indicated, over the next five years, they plan to sell their business to retire, most of them to an outside third party.
The stage is now set for buyers to attempt to buy healthy businesses at distress sale prices. Business owners are best to not attend this 'play' - in just a few months, their businesses will be worth a lot more than a valuation would suggest today.
Rincroft facilitates the divestiture of medium sized businesses. Our clients are companies which are well established and profitable. Since its inception, our company has completed the sale of more than 50 business across a wide range of industries. We also provide advisory services assisting owners in building sustainable value even if they have no immediate plans to sell.
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