Entrepreneur
Sponsored entry: Are you prepared for the journey of going public?
By David Fabian
No one will tell you going public is easy, but the rewards can be monumental. The key is proper preparation, experienced guidance and effective execution. When preparing to issue an initial public offering (IPO), you should take into consideration such factors as the strength of capital markets, timing, your company’s past and current performance as well as the related costs (current and future) associated with being a public issuer.
Valuations
The valuation of a business is crucial when preparing to go public. This is a great indicator for potential investors and shareholders as it not only showcases your company’s worth, but also helps determine if your IPO is profitable and sustainable. There are a couple of ways of conducting a valuation. The first is to get a sense of your company’s value from the investment bank taking it public. The second is to have a valuation performed in advance by an accounting firm.
Conducting an extensive comparative analysis will allow you to better understand the market and heighten your competitive edge. Assessing similar companies in your market that have experienced issuing an IPO is a great way to learn from their mistakes and successes and also prepare you for your journey. Your assessment should look at reviews of financial statements, operational structure, boards of directors’ composition and year-over-year growth (or retraction).
Governance and corporate structure
With heightened corporate governance standards for public companies and increasing liability exposure, the process of assembling a strategic board of directors is more complicated and critical for today’s IPO candidates than it was in the past. Unlike a private board, your public board will require a substantively diverse mix of audit, governance, compensation and compliance specialists. Corporate strategists and experienced executives will also ensure you receive good counsel. Attracting the right board members can be difficult, so ensure you can clearly outline your company’s purpose and long-term vision.
Retaining the right talent and molding your company structure to operate in a public environment require a lot of time and money. To avoid any public scrutiny and lawsuits, you must train your employees to adjust to an increased level of transparency.
Timing and market readiness
Many companies are still too small when they decide to go public and usually lack the necessary resources and expertise needed to thrive in the market. Part of transitioning to a public company is converting and adhering to International Financial Reporting Standards. The conversion is not only very expensive, but time consuming.
In addition to ensuring your internal environment displays market readiness, you must first evaluate your competitive environment and determine whether the market is ready to accept an IPO. To determine this, choose an underwriting group that is familiar with the IPO pipeline and can assist in determining when to file the prospectus document.
As the saying goes, timing is everything. If timed properly, you will achieve a favourable position with potential shareholders and also provide your investors with the greatest gain for the months and years after the IPO.
If timing isn’t right, you should consider waiting to ensure optimal returns — as taking the time to understand the pros and cons of an IPO and the impact of such a transaction on your organization is vital to a company’s success.
Is your company ready?
Going public is a landmark decision for any company. Without the proper framework, it’s unlikely that your business will succeed in issuing an IPO. Many pieces need to fit together — such as the right timing, the right economic climate and the right financing — to issue an IPO and maintain long-term success. Having all of these key elements secured and primed before moving forward will strengthen your position. If one piece falls short, your whole IPO opportunity may be in jeopardy, and the outcome could be costly.
Rather than asking if the markets are ready for you, determine whether you are ready for the public markets.
David is a partner in the Assurance group of Ernst & Young. David has over 17 years of experience and an extensive background managing audit and tax assignment for both private and public companies. David works predominantly in the manufacturing, steel, technology and professional services sectors. Over the years, he has built a practice focused on assisting clients in expanding and diversifying their business units throughout North America and worldwide.
Failing to provide a valid disclosure document can be costly for franchisors
The obligation of a franchisor to provide franchisees in Ontario, Alberta, Prince Edward Island and New Brunswick with a franchise disclosure document should not be taken lightly.
The document is intended to operate as a type of prospectus franchisees can rely on in making informed investment decisions about entering into the franchise system. As a result, the statutes in the aforementioned provinces set out a detailed list of information that every valid disclosure document must include. Beyond the content, though, are technical timing and format delivery requirements with which franchisors must comply.
The penalties for failing to comply with these legislative requirements are staggering and are a very powerful remedy franchisees should be aware of.
If a franchisor fails to provide a disclosure document at least 14 days before the franchisee signs any agreement or pays any money to the franchisor, that franchisee will have 60 days from the date it received the document to “rescind” the franchise agreement. And if a franchisor fails to provide a disclosure document at all, the franchisee will have up to two years from the date it signed its franchise agreement to have that agreement “rescinded.”
So what does mean for the parties involved? Within 60 days of the effective date of rescission the franchisor must:
- Refund to the franchisee any money it received, other than for inventory, supplies and equipment;
- Purchase from the franchisee any inventory, supplies and equipment that was purchased pursuant to the franchise agreement at a price equal to what the franchisee paid for them;
- Compensate the franchisee for any losses incurred in acquiring, setting up and operating the franchise.
In essence, the franchisor must make the franchisee whole — as if the agreement was never signed. To avoid this franchisors need only ensure their disclosure documents are compliant.
Chad Finkelstein is a franchise lawyer at Dale & Lessmann LLP (www.dalelessmann.com) in Toronto and can be reached at cfinkelstein@dalelessmann.com or (416) 369-7883.
Startup Weekend Nairobi
Location: Nairobi, Kenya
Date: February 24th–26th
Startup Weekends are 54-hour events where developers, designers, marketers, product managers and startup enthusiasts come together to share ideas, form teams, build products, and launch startups!
Peter Aceto: There’s a personality conflict in your team ― what do you do?
Peter Aceto is a passionate leader and committed savings advocate. His career with ING DIRECT began in Canada more than a decade ago as a founding member of its senior leadership team. As the senior leader of ING DIRECT Canada, he provides his relentless focus on delivering an outstanding customer experience and the cornerstones of success for ING DIRECT: maintaining a simple and efficient business model, working with management to develop and evolve an innovative, winning and adaptable strategy, managing risk, return and growth; and building an ever strengthening team to execute the company’s vision.
Room for savings with travel plan
Peter Thorpe spends an average of 60 nights a year in hotel rooms. As a regional sales manager for family-owned propane and natural gas wholesaler Diversco Supply Inc., of Cambridge, Ont., he keeps travel costs down with a powerful moneysaving tool: a membership in the Canadian Professional Sales Association (CPSA). “It gets me the best rate on hotel rooms 99 times out of 100,” he says. More importantly, rates are pre-negotiated, “so I know exactly what I’m going to pay whether I book my hotel three weeks in advance or that same day.”
The CPSA’s travel savings plan, Travel Save Pro, has been available to sales professionals for more than 100 years. It was the primary reason 77% of the association’s members signed on. But in a bid to raise cash for its educational and training endeavours, last spring the CPSA began offering the program to other travellers for $ 129 a year. “We think we have a product of value to small-and medium-size businesses out there,” says Harvey Copeman, president and chief executive of the CPSA. “We can save them money. And in return, we’re looking for money to support our costs.”
Low hotel and car rental rates are fuelled by the collective purchasing power of the CPSA’s 30,000 members, he says. What’s more, while online travel providers and travel agents get a commission when you book with them, the CPSA charges only a one-time membership fee; the rest of the savings accrue to the members. “We beat Travelocity, Expedia, Hotels.com and CAA somewhere around 90% of the time by an average of $ 31 a night,” Mr. Copeman contends.
“If you’re travelling more than three nights a year and renting a car more than once a year, you should belong to the CPSA for the travel benefits,” Mr. Thorpe says. “I pay for my membership fees in the first two or three stays.” For small-and midsize businesses that, unlike corporations, don’t have the clout to negotiate discounts, the CPSA travel plan is a “no-brainer,” he says.
Note that because the CPSA’s members travel mainly in Canada, that’s where you’ll get the best rates. (A select number of U.S. and international hotel chains also offer members between 10% and 25% off their best available rates.) In addition, the tool works best for midweek room rates. “We are geared to business travellers,” Mr. Copeman says. “We all know that on a Friday or Saturday night in Timmins, Ont., or Estevan, Sask., you can probably put any amount of money down on the front desk and get a room in a hotel. It’s mid-week when we perform best and that’s why our members join.”
Especially good deals are identified in the Travel Save Pro guidebook by blue bands, and options include everything from luxury lodgings to budget hotels. In general, the more upmarket the hotel, the greater the savings. “Think of us as a kind of co-operative corporation working on behalf of our members,” Mr. Copeman says. “Our members make somewhere between 21 and 24 trips per year and the trip duration is between two and four nights per trip for a total of 300,000 room nights annually. They’re heavy users and therefore the hotel and car rental companies are interested in wooing our business.”
By the numbers CPSA negotiates discounted rates in advance for the whole year so members know up front what they’ll be paying. Want to get a sense of whether it’s worth while to join? Check out the room rates for every major chain worldwide including Delta Hotels, Fairmont, Marriott, Starwood, IHG (which includes Holiday Inn), Hilton, Best Western and Hyatt by going to travelsavepro.com and downloading the Hotel Savings Guide. Or do a quick search by city for hotels you frequent. “Everyone can access that information,” Mr. Copeman says. “But you can’t get the discounted rates unless you join.”
A quick perusal found a rate of $ 79 for the Comfort Inn and Suites in Kamloops, B.C., Feb. 27 to 29, compared with $ 114 on Expedia.ca. The Coast Plaza Hotel and Conference Centre in Calgary cost $ 120 a night at CPSA’s discounted rate and $ 174 on the hotel’s website for the same time dates. A CPSA rate of $ 192 for the Fairmont Royal York held up less well, however, since Hotels.com was offering $ 167 for the same time period (discounted from $ 199). Keep in mind, though, you are not obligated to use CPSA’s negotiated rate. You can check out competitor prices and book the lowest. If you’re a frequent traveller, it’s likely Travel Pro would pay itself off fairly quickly.
“As good as the hotel rates are, if you’re renting a car even once a year, you should be using Travel Pro,” Mr. Thorpe contends. Discounts are substantial, averaging about $ 14.43 a day last year at major car rental agencies such as Hertz, National, Avis and Budget and Enterprise. Like hotel rates, those discounts are audited by a third party to ensure they achieve their money-saving goal.
“During the holiday season for a 13-day stretch I rented a car in Naples, Fla.,” says Mr. Copeman. “Through my CPSA program it was $ 600 and the closest I could get on any of our partner websites, as well as Expedia and Travelocity was $ 1,200. So my CPSA rate saved me $ 600 on that transaction alone. If I was Joe Average off the street I would have had to pay the $ 1,200 or rent a bicycle.” The program also offers a 5% discount on Via Rail trips and 10% off Porter Air flights.
You can sign up online for Travel Save Pro and get a temporary card and a discount code right away. Then call the hotel directly, or book online using the discount code. On check-in, the desk clerk will ask for your membership card as validation. Travel Pro subscribers can also use BT Sidekick, a BlackBerry app designed to locate all hotels in a specific area to compare prices, get reviews and locations, and identify those where the CPSA has negotiated a special rate.
Although Hot Wire seems to get some great rates, you don’t know in advance where you’ll be staying, Mr. Thorpe says. “When you spend as many nights on the road as I do, you like to know that the place is going to be clean and comfortable.”
— Camilla Cornell is a business writer and intrepid traveller, who nonetheless appreciates a little comfort when away from home.
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