Friday, November 20, 2009

All-Star Panel on Buying and Selling Companies

My column this week in the Financial Post recounts a few highlights from a lively business panel featuring two Dragons from CBC’s Dragons’ Den show (Kevin O'Leary and Robert Herjavec), and two of Canada’s most prominent women entrepreneurs: Teresa Cascioli (founder of Lakeport Brewing) and Rebecca MacDonald (Just Energy).

The subject was the buying and selling of companies in today's economy. The debate covered a range of subjects, including valuations, acquisitions, buyers vs. builders, and the lies sellers tell. It’s a fun (and timely) read.

As MacDonald noted, "This is a phenomenal time to be in the market... 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."
Added Herjavec: "We just bought a $15-million company with no money down, based on their own cash flow... If I had approached this guy with this deal three years ago, he would have laughed at me."

The irrepressible O'Leary had lots to say: "Maybe those aren't distressed values... 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."

For her part, Cascioli urged sellers to hold off. "If you can ride out [the current downturn], you will get more money tomorrow than you'll get today."

Read the full story here.

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