Equicapita Business Owner Briefing - What Are Normalizations To Cashflow & How Do They Affect Value

CALGARY, Alberta - July 30, 2013 - PRLog -- Greg Tooth, one of the co-founders of Equicapita reports "Equicapita is producing a series of short briefings for business owners considering the sale of their business.  The second in the series is titled " What Are normalizations to cashflow and how do they affect value?  The full document can be found on the Equicapita site but this is a quick excerpt from the introduction:   When calculating the cash flows of a business there are many aspects that must be taken into consideration to determine what the cash flow is. Expenses are added to and subtracted from the cash flow to arrive at the adjusted operational cash flows. Items that have been expensed and are not part of true operational expenses of the business should be added back to determine the adjusted cash flow. Conversely, expenses that have not been accounted for which are true operational expenses should be subtracted from the cash
flow."  

Tooth went on "Each briefing will deal with another common question that business vendors must consider before, during or after the sale and will be posted on the Equicapita website as a free resource. We believe that education resources such as these are important as boomers retire over the next two decades and transfer of ownership of a large number of small medium enterprises (SME) via sales or succession.  Estimates from the Canadian Federation of Independent Business are that this transfer could exceed $1 trillion making it one of the largest in Canadian history.”

Equicapita is a Calgary-based private equity fund focusing on acquiring Canadian SMEs that can generate strong, sustainable cash flow from their operations in niche markets.  Equicapita generally seeks to acquire businesses:  at what it believes are reasonable prices;  with a demonstrated history of free cash flow greater than $1 million per annum;  with a durable competitive advantage;  that operate in industries that Equicapita believes have sound long-term macro prospects;  with ongoing participation of senior personnel;  with the ability to maintain the cash flow without disproportionate amounts of new capital; where Equicapita can partner with management and align their interest with Equicapita through tools such as earn-outs, vendor take backs and management incentive plans;  to be held for the long term;  where there is some potential to grow sustainable free cash flow, but where that growth is not essential to generate suitable returns.”

Equicapita believes that there are compelling reasons for making private equity investment in the Canadian SME market which is experiencing one the largest generational transfers of wealth as boomer entrepreneurs retire and sell their businesses.  The investment has a number of key drivers including:
-   Generational opportunity to acquire “baby boomer” SMEs:  There is a demographic opportunity to capitalise on the accelerating turnover of baby boomer owned, western Canadian SMEs.  According to CIBC “An estimated $1.9 trillion in business assets are poised to change hands in five years — the biggest transfer of Canadian business control on record.”
-   Attractive target market:  There is a private equity funding gap in the $2 to $20M range is often referred to as the “Nano Gap”.  This creates an attractive environment to acquire stable cash flow streams.
-   Valuations:  Current trailing cash flow valuations are artificially low, incorporating weak 2008-10 operating results post credit crisis.

This news release may contain certain information that is forward looking and, by its nature, such forward-looking information is subject to important risks and uncertainties. The words "anticipate," "expect," "may," "should" "estimate," "project," "outlook," "forecast" or other similar words are used to identify such forward looking information. Those forward-looking statements herein made by Equicapita, if any, reflect Equicapita's beliefs and assumptions based on information available at the time the statements were made. Actual results or events may differ from those anticipated or predicted in these forward-looking statements, and the differences may be material. Factors which could cause actual results or events to differ materially from current expectations include, among other things: risks associated with the ownership and operation of businesses, including fluctuations in interest rates; general economic conditions; supply and demand for businesses; competition for available businesses; changes in legislation and the regulatory environment; and international trade and global political conditions. Readers are cautioned not to place undue reliance on any forward-looking information contained in this news release (if any), which is given as of the date it is expressed herein. Equicapita undertakes no obligation to update publicly or revise any forward-looking information, whether as a result of new information, future events or otherwise.