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BUS3140

BUS3140. Lecture 8. Agenda. Describe valuation techniques and the scenarios that can trigger a change in valuation Identify and describe Government programs: available incentives available tax shelters taxes and taxation incorporation Exit Strategies

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BUS3140

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  1. BUS3140 Lecture 8

  2. Agenda • Describe valuation techniques and the scenarios that can trigger a change in valuation • Identify and describe Government programs: • available incentives • available tax shelters • taxes and taxation • incorporation • Exit Strategies • Discuss implications of Private vs. Public ownership • Describe the process of selling a privately owned Canadian company • Describe the IPO process

  3. Valuation techniques • Most common method: compare valuation ratio with a comparable public company… • A good one is Price/Earnings (P/E) ratio • Discounted multiple of current revenue • Book value (total assets – (intangible assets (patents, goodwill) +liabilities)) • Revenue over a certain period • Discounted cash flow (beyond our scope) http://www.cbc.ca/news/business/how-much-is-your-small-business-worth-1.1000112

  4. Factors that can affect your valuation/stock price • news releases on earnings and profits, and future estimated earnings • announcement of dividends • introduction of a new product or a product recall • securing a new large contract • employee layoffs • anticipated takeover or merger • a change of management • accounting errors or scandals

  5. Government programs • http://www.ic.gc.ca/eic/site/csbfp-pfpec.nsf/eng/Home (watch the small video) • Help on getting financing: • http://www.ic.gc.ca/eic/site/icgc.nsf/eng/h_07047.html • start to finish lifecycle assistance from the Government: • http://www.ic.gc.ca/eic/site/icgc.nsf/eng/h_07098.html?Open&src=mm2#ic-subnav-1

  6. Government programs (2) • Government Grants and Financing • Grants, contributions and financial assistance • Loans and cash advances • Loan guarantees • Tax refunds and credits • Wage subsidies • Equity investing • * for all of these, ensure your Business Plan is up to date and solid!

  7. Implications of private vs public ownership • Financial reporting • Public = separate entity, private = part of your entity • taxes

  8. Selling your business • If you are selling your business or part of your business, you generally set an amount for the entire business. • This amount will be based on the value of each asset, the value of inventory held, and goodwill • In some cases, your sales agreement sets out a price for each asset, a value for the inventory of the company and, if applicable, an amount that can be attributed to goodwill. • Depending on your situation, you may have a recapture or a terminal loss of capital cost allowance (CCA) on the sale of your assets. • http://www.cra-arc.gc.ca/tx/bsnss/tpcs/lf-vnts/sllng/menu-eng.html • http://www.cra-arc.gc.ca/tx/bsnss/tpcs/lf-vnts/sllng/sllng-eng.html

  9. Selling your business (2) • Tip: sell the business when the time/reason is right (don’t sell when its going downhill) • Identify what is going to be sold (physical assets/goodwill/trademarks/client lists/existing contracts/etc) • Get help with this part by a trained professional • Make sure everything is in order (you want to show your business well)

  10. The ipo process • Step 1 – is going public a good idea? • Evaluate your company’s readiness • Assess market acceptance • Asses impact on your company • Step 2 – prepare to go public • Thorough review of your company • Decide on corporate and management structure • Assemble your team • Plan your timeline • Develop the offering http://www.kpmg.com/Ca/en/topics/IPO-Services/Documents/KPMGs-Guide-to-Going-Public.pdf

  11. The ipo process • Step 3 – executing your IPO • Prepare preliminary prospectus • Underwriters’ due diligence • Apply for a stock exchange listing • Regulatory review • Marketing • Pricing • Finalize documents • Closing • Now your company s public and must adhere to rules of public company http://www.kpmg.com/Ca/en/topics/IPO-Services/Documents/KPMGs-Guide-to-Going-Public.pdf

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