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small business ArticlesTips for Mergers and acquisitions

Mergers and acquisitions are not only for the big-timers. If you are an aspiring entrepreneur, you should not only be concerned with offering great services and keeping your customers happy. You should also be on the lookout for opportunities whereby you can acquire companies or businesses that can give you an advantage in the market. Are you an entrepreneur looking to acquire a privately owned company?

Here are 5 helpful tips that you should consider before acquiring a business.

  • Exclusivity Agreement

The first step every entrepreneur should take before an acquisition is to draft an exclusive agreement asking for a thorough investigation into the company. This agreement is often part of a letter of intent.
A prior agreement would also put you in good stead to avoid any bidding wars that might arise from other prospects. Most sellers would reserve the right for you to negotiate and investigate for 60 days. If you are not ready to buy or you are far from satisfied with the offer, you can allow the seller deal with other parties after the period has passed.

  • Assets are Important

You should spend money on tangible assets and not stocks. A stock transaction gives you access to liabilities under law, whereas in an asset transaction these liabilities are only agreed upon within the agreement. This is not to say that some liabilities are not advantageous to an acquisition. But you need to be aware of any loopholes and protect yourself against any issues that might arise.

  • Tailor to Transaction

The early draft of the acquisition agreement must be prepared to a particular transaction. It is not wise to use a general agreement in this case. This draft would be used for subsequent discussions regarding due diligence investigations, strategy, purchase prices and risk allocations.

The agreement should be well drafted with appropriate representations, warranties and indemnification obligations to protect the interests of the buyer. You should also get a consultant to help you out. The role that your consultant plays is a crucial one.

He must possess a comprehensive knowledge about your business and understand the risks that are involved. This helps you to make smart decisions based on your own terms. There is nothing better than getting someone who knows his way around these things.

  • Look Out for the Caps

One of the most contested issues when acquiring a privately owned company are seller damages. This is neither right nor wrong. It all depends on the type of transaction and the bargaining power of both parties. If there are many people bidding for a company, the ceiling cap might be 7% or less due to the competition involved. If you are the only bidder, you might be in strong position to bargain asking only to pay the purchase price and waive the cap.

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small business ArticlesM&A Failure Reasons

It is an open secret that not all mergers succeed. It is true that mergers help cut costs and boost productivity or profitability. It might be a simple and straightforward process for some companies. However, it might be downright complicated for others.

Statistics show that about two-thirds of all big mergers crash and burn. What this means is that they dip in the stock market and also lose confidence in the eyes of the consumer. Moreover, the reasons why some companies opt for mergers are flawed thereby devoid of adequate research and planning. There are many reasons that have caused the failure of mergers and acquisitions. Here are some of them.

  • Unfavourable Market Conditions

A market condition might favor an acquisition or merger. But as soon as you sign all the dotted lines, the market can swing in a different direction and put you under a cushion. This makes it almost impossible to get back to the drawing board, especially when you are still trying to find your feet. Unless there is a cohesive integration plan to help guide your process, you will struggle to adapt and get out of the rut.

  • Insufficient Workforce

A merger can take its toll on workers who cannot cope with the burden of new duties. These people spread themselves thinly and neglect critical aspects of the business which spells doom in the end. Before a merger is considered and eventually accepted, it is important to have the required people on board. Do not downsize because you want to save costs. Maintain a relevant staff strength so that your merger does not collapse from an insufficient workforce.

  • Corporate Culture Clash

The chances of a business merger succeeding can be further hampered if the corporate cultures of both companies are totally different. When you acquire a company, you do not only seize the opportunity because it is available. There are other things you need to consider as well.

You need to look at market and product compatibility. Furthermore, you also need to consider the work force and the working environment of the previous company. Disgruntled employees have sent many joint companies down under.

  • Haste in Cost Reduction

Companies focus too much attention on cutting costs after a merger. This adversely affects revenues and profits. Business mergers should focus more on building synergies and cohesion first rather than reducing costs immediately. This is another major reason why mergers fail and customers flee.

It is important to note that not all business acquisitions fail. Mergers are advantageous because they increase size and reach. They make you competitive in the marketplace and keep your competition on their toes. The utmost success of a merger mainly depends on how the 2 companies can be integrated seamlessly for daily operations.

<The Reasons Why Many Mergers and Acquisitions Fail>

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small business ArticlesReverse Mergers Explained

A public offering is a great way for a company to raise capital and improve their corporate profile. However, it can be a complicated and somewhat expensive process. There is a shortcut that can be taken. It is called a reverse merger; it is used as an alternative to an IPO.

A reverse merger is when a private company acquires a public company that is dormant. This public company might be dormant. But it must be listed on the stock exchange even though it has no assets to fall back on probably due to a bankruptcy.

Many companies take to this alternative. Reverse mergers are also known as reverse takeovers as it gives a private company control over a public one. The shareholders of the private company control the board of directors and maintain a strong ownership of the public company.

Benefits of Reverse Mergers

One of the benefits of a reverse merger is that it can be concluded quickly and cheaply. It does not involve the unnecessary protocol that is usually associated with public offerings. Reverse mergers are perfect for businesses or companies that are not desperate to make money in the short-term. It works better for companies that want to grow slowly but surely.

Secondly, reverse mergers provide a security that might not be available with IPO opportunities. An IPO depends on marketing conditions. Reverse mergers do not rely on this climate. They cannot be cancelled at the last-minute and are not subject to instability.

When a company plans to go public via an IPO process, it can take more than a year. The cost of this process can be a very expensive one. A reverse merger does not take up to 30 days to complete. Ironically, public companies enjoy higher valuations when compare to private companies. And what this means is that they have a faster growth rate as well.

Reverse mergers are good because they offer tax shelters to private companies. The public company may have taken plenty of hits and suffered losses. However, these losses can be carried over and converted to profits. By merging a public company with a private company, it is feasible to protect your merged company profits from subsequent taxation.

If you want to be successful with reverse mergers, you need to be highly perceptive. Keep tabs on happenings in financial circles and have a keen eye for spotting opportunities before they go public.

It is always smart to leverage on reverse merger opportunities that can give you back your money’s worth in little over a year.

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Pricing a Business for Sale

There are many tools available if you want to determine the price dynamics for selling your business. There is no particular price that you can use. The final price rests solely on the buyer and the seller. How bad does the buyer want to buy? How strongly does the seller want to sell?

These questions play a domineering role towards closing any sale.

  • Compare Before Proposing Asking Price

If you want to sell a business you can investigate and see how much a similar business is being sold. You can also contact a Business Broker and/or the national trade association/s where applicable. These organizations keep valuable information about businesses in key industries and are always willing to share it with anyone interested.

  • Hiring Business Broker

Moreover, you could hire a Business Broker who could do all the grunt work for you and also help you broker the deal eventually when buyers begin to show up or bid to take over your business. You can sell your business based on the asset that you have or monies that you generate including the cash flow, debt payments and revenue base.

  • Business Financials

Ensure that your business records are in order. Any serious buyer would want to look at your books. So it is imperative that your financial statement be in good working order. Income statements, cash flow statements, and balance sheets are what potential buyers usually ask to see.

  • List of Asset

You will also need to know the full estimate of your physical assets. Prepare them in a list and price them accordingly. Prospects that come around want to see a comprehensive asset list including the price of purchase and the current market value. This plays a large role in determining how much your business will go for.

  • Business Manageability

A business that is dependent on the owner or certain employees affects price. You need to make everyone relevant in the workplace. Appoint a deputy manager and key personnel in all the departments. This delimits risk and quells fears that the company would crash if a selected few leave.


In conclusion, try to focus on the core strengths of your business. A buyer will still go ahead with a sale even if he notices certain weaknesses in a business. Buyers do not necessarily tilt towards diversified businesses. They are more concerned with the assets and the strengths of a business. The pricing of a business will go up if you can improve your financial ratios and are ready to present before attempting to sell to buyers. In other words you need to prepare your business for sale before putting it for sale.

<The Pricing Dynamics of Selling a Business>

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small business ArticlesFix a Troubled Business

The aim of any business is to turn a profit. Profits show how well a business is performing under the present circumstances. Huge profits mean that the business is doing well; little profits show that the business is barely keeping its head above water. This is not a position that you would want to find your business.

When you lose relevance in the marketplace or suffer a lull in profits, investors and shareholders alike have every cause to panic. When a company is faltering, it is imperative to find a means of fixing this problem in order to prevent a total collapse.

The first thing that you do is to get new people in place particularly in top management where they can steer the business from troubled waters. Most businesses are made or marred by management. These are the people who make the decisions and these decisions make or break a company.

When you recruit people to fill new positions ensure that they are placed there based on their expertise and competence. You do your chances of fixing your business no good if you employ people based on sentiments and emotions. It is crucial that you look for experts and people who have a good idea about what makes your type of business tick.

Secondly, you would need to cut down all unnecessary costs. Take out time to run through all the expenses that your business generates and see what you can do without. This might mean closing up some departments and even laying off some workers. It might also mean selling off some seeming assets which in actual fact are only liabilities.

Thirdly, many businesses wobble and stumble because they do not know how to collect their money after services have been rendered. They have a long list of debtors who make empty promises and pay little money. You cannot stay in business for long if you continue to play Mr nice guy and work for free. Chase your money. You need to get paid. Hire debt collectors to ensure that your money is recovered.

When it comes to fixing the problems that are disturbing your business, you need to think like a doctor. A doctor does not give you weight loss tablets if you are complaining about an ulcer. In the same vein, make sure that you are looking for the right solution to fix a problem and not the wrong one.

Avoid complaining. Listen to your team of employees and inspire one another with a win-win attitude that everything is possible. We are not only in business to make money. We are also meant to add value to the lives of people and make them happier. So always improve on what is working and look for solutions for what is not.

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small business ArticlesTroubled Business Signs

It is always important to act fast when you sense that a business is in trouble. It could be a case of under-performance or a deepening financial crisis. It is crucial to act quickly and decisively once you see the signs that a business is going under in order not to be taken unawares.

Here are 5 signs that tell you a business is in trouble.

1. Unhappy Employees

Most employees have a 6th sense and know when a business is faltering. This can start with salaries being paid in installments or bonuses and allowances being cut altogether. Once employees sense that the future has suddenly become bleak it takes a toll on their productivity and performance. This marks the beginning of the end of a business.

2. Poor Sales

If your sales fall short of the expected target, then you lack the revenue to turn a profit or break even. So you do not have the money to operate running costs and pay salaries. In other words, you are running your business at a loss. And no one can survive that long without a consistent flow of cash and sales. When you struggle to meet your money requirements, you have loads of debtors to deal with everyday. There is no business that can survive in this manner.

3. Competition Closing Shop

It is not always a good thing when your competition starts to pack their bags and close shop. You might think you have one less company to worry about. But it might just be a warning sign that the market that you are in is not as profitable as you think. When the competition begins to cave in, it is important that you investigate the reasons they are bailing.

4. Big Guns are Leaving

Do not rest on you oars and think all is well even if no one has been sacked or told to go on a leave of absence. When top management begins to hand in their resignations to the human resources department, you need to get worried. They are at the top and probably see what you do not see. They are always quick to jump ship before things go full circle, crash and eventually burn.

5. Doing More for Less

You should know that your business is definitely in trouble when you are taking on extra duties and staying longer hours without being given a raise. This usually comes up when people are leaving and are not being replaced. You are given duties that do not match your job description and told to head out to other departments to help people out. When you are doing too much for less, those are the telling signs that a business is going under.


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small business ArticlesMaintain Your Business Success

As the saying goes it is very easy to get to the top. But it is very difficult to remain at the top. There are many businesses that succeed only to come crashing down only after a few years.

Here are 5 revealing ways that you can maintain your business success at the top.

1. Be a Risk Taker

You need to get out of your comfort zone if you want to move ahead. The business world is always changing and you need to adapt with these times too. Good returns always come with a decent amount of risk. However, you need to look out for calculated risks. It is important that you consider all the pros and cons to ensure that the risk is worth taking. If you are not willing to take risks then you do not want it bad enough.

2. Remain Competitive

For you to remain ahead, you need to provide a product or service that is different from the rest of the competition. You need to keep evolving and changing in order to maintain the edge. You need to be constantly on the go, looking for new ways to do new things. And once you find them keep them secret.

3. Get Good People

You might have the machinery to make a business work. But you need good people to make a business great. Many CEOs take credit for the success of their business. But the truth is no man is an island. He surely cannot do everything on his own. Every business needs people to get to the top and to remain at the top. Get good people and give them a stake in the company so that they do not break away to do their own thing and jeopardize things for you.

4. Offer More Value

How many times have you heard that a customer is king? The customer is indeed king. They keep the money coming in and literally keep you in business. You need to keep them happy and satisfied all the time. You need to treat them right because your competition is hanging around to steal them right under your noses if you disappoint. It is important to always offer value and treat your customers like treasure. Businesses do not remain at the top from dealing with one-off customers. They are at the top because they keep their customers.

5. Plan Plan Plan

If you fail to plan, you are planning to fail. Planning entails looking at a host of choices that you can use and the best road that you can take. It is alright to make a plan and change it because of the circumstances that might arise. But remember that you need to make these plans, set targets and consider the challenges that might hinder you from progressing forward. When these things are well laid out, you know what to do as of when due.


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small business ArticlesSecure a Loan to Acquire a Small Business

When it comes to an acquisition there are always crucial things that you need to consider. Many acquisitions fail because priorities are not straightened. There is more to an acquisition than purchase the price. You need to concern yourself with the potential for growth and whether the business actually complements your company. Once this is settled, you can acquire the company. If you are having problems raising funds or capital, you can secure capital via other means.

Here are 5 ways you can secure a loan to acquire a small business.

  • Bank Loan

When it comes to looking for funds to acquire a business most business owners would turn to the banks. Loans are based on credit histories, the type of business that you do, asset volume and the number of years you have been in business. You use assets to secure a loan. What this means is that if you fail to meet up with payment, your asset is then sold to cover up the loan cost.

  • SBA Loans

These are loans supported by the Small Business Administration (SBA). Ironically, SBA does not offer loans. However, they stand as a guarantor that the recipient of the loan will surely pay the lender. SBA loans are meant to help small businesses get the necessary capital irrespective of their credit status or the quality of their assets.

  • Start Up Loans

These special loans are offered to fresh businesses that require capital to start-up or expand. These monies are used for equipment, inventory, overhead costs, staff salaries and rent. Start up loans come in handy because they can be obtained without any credit history or assets.
Short term loans have low-interest rates because of their quick repayment term. Long term loans are used to offset bigger budgets. They are paid back over a long period of time and attract high interest rates.

  • Check Credit

Revolving check credit is a facility that is offered only by banking institutions. The recipient is provided funds to use as credit and writes a special undertaking about repaying the loan in 3 installments. Charges are usually incurred based on credit used every month. Lenders have ample time to pay back this loan. The interest fees are relatively low.

  • Merchant Cash Advance

Businesses that rake in at least $5,000 in monthly credit card sales can afford to get a loan of $250,000 or more with a merchant cash advance. Payment is made from credit card sales until the amount is paid in full. You do not need collateral or credit checks. Another good thing is that there is no discrimination, all businesses can leverage on this opportunity.

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Business Valuation Methods

small business ArticlesThere are many ways to value the actual worth of a business. The Business Valuation Industry uses a wide array of methodologies. Business owners have their personal assumptions about what their businesses are worth.

Here are 5 common and quick business evaluation methods you can use to determine the value of your business.

  • The Book Method

This method is based on the current market price of assets. For instance, when a buyer is looking into purchasing a company, he might consider the stock certificates. A buyer may not have full access until he has paid off some of the liabilities incurred by the company. But it is also possible for the buyer to possess everything outright. However, these issues are not cast in stone. They vary from one transaction to another. By using the book method, both the buyer and seller agree on a fair market price for the assets.

  • Rule of Thumb

ROT or Rule of Thumb is great for small and medium-sized enterprises. An evaluation is basically made by comparisons. It is a simplification method that is not accurate and should not be fully considered because it might not be correct. However, it gives a rough estimate of how much a business might actually be worth by comparing it to a similar business.

The Internet has made everything easy. It is possible to view businesses listed for sale and get an idea how much you own business is worth. But keep in mind that most businesses would not sell at the actual price that they quote in these listings.

  • PFA Price

This is a Plucked From Air approach where guesses rule about the pricing of a business. This is done without considering any of the formal valuation methods. The danger of using this method is that one can undervalue the actual cost of a business and sell it for cheap. Moreover, an owner might value his business at a price not exactly consistent with the marketplace thereby making it impossible to be sold or acquired by another person.

  • Net Cash Flow

The best means of knowing the worth of your business is to calculate the most recent annual and profit loss statement. This helps to determine the purchasing power of the business and gives a realistic picture of the cash flow that is being generated by the business. Once the figure has been determined, multiply it by number of business categories.

Keep in mind that these evaluation methods offer a cheap and quick idea of the value of a business. They can be used as a benchmark for selling a business. Though in the long run a business is always worth more than what someone wants to actually pay for it.

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small business ArticlesAcquisition Benefits & Reasons

There are many benefits when it comes to acquiring a business. There are many  reasons why other businesses acquire other businesses.

Here are some of the benefits:

  • Tax Gains

Acquisitions lead to tax gains. When 2 companies merge or when one acquires another they generate more value than they would have as separate entities. When one company buys another company, the new shareholder value increases.

  • Cost Efficiency

An acquisition also helps to maintain greater cost efficiency. When 2 companies come together and form a bigger company, the production volume is executed on a much larger scale. And based on the economies of scale, when production is done on a larger scale, the cost of production per unit reduces.

  • Value Generation

Business acquisitions lead to increased value generation. The shareholder value of one company is less than the value of a joint company. This is the leverage a company uses to improve cost efficiency and implement the economies of scale.

  • Others

An increase in market share is a plausible benefit of a business acquisition. For instance, if a financially robust company acquires a business in distress, the strong company can enjoy a substantial market share because it can function more competitively.

Necessity of Acquisition

  1. A business acquisition is necessary when a business wants to chart a new course or enter virgin territory.
  2. Secondly, this strategy comes to the fore when an organization wants to reduce some administrative benefits.
  3. Thirdly, if a business wants to introduce new products, it can use a new business face via an acquisition to accomplish these goals.
  4. Furthermore, you can inherit quality or competent staff and gain access to funds or valued assets for development. Production facilities and distribution channels take time to create and cannot be quantified with money. So look for systems that benefit your business and make it more effective.
  5. Look for businesses that are not making too much of money but have potential for the future. What this means is that you can by them cheaply and realize these potentials later on. Alternatively, if your business is not doing too well you can purchase an existing business and expand from the inside. A business acquisition helps reduce overheads and marketing budgets.
  6. If these businesses are operating in the same industry, they avoid the duplication of duties, cut down costs and improve revenue. Acquisitions have become a norm of the corporate world. It has contributed immensely to the numerous advantages on offer in the business world. This helps firms leverage on the advancement of technology and protect themselves against unforeseen circumstances.


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Looking to sell your business? Selling your business confidentially & in top dollars needs preparation, patience, & right Business Brokerage Service. We market & process your sale while you concentrate on your business operation.....details


Considering buying a business? We can assist you find the right business & manage the entire buying process to ensure a successful transaction. For matching business opportunity suitable for you, let us know your preferences. ...details


Right pricing results in quick sale of a business. Overstating or underestimating business value can be costly for an owner. We help our Client avoid costly mistakes by valuing a business that can help you make/ save when buy or sell....details


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