Private Investment Fund for Your Company
Do you own a cash flowing business which is seeking a debt or equity financing vehicle for large growth expansion (>$3M)?
Are you concerned with the potential of major investment partners (Venture Capitalists, Angel Investors and Private Equity partners) interfering in your business and the way you and your current board of directors wish to operate and control it?
The degree of success in any business, is dependent upon the quality of the questions which are asked.
- How do you know which questions to ask, if you have never worked with a major financial partner (Venture Capital, Angel Investor, Private Equity Partner) before?
- Or if you have, what is a new and unknown major partner like to work with?
- Many business owners have heard the horror stories which make the idea of seeking major financing partners unattractive.
- Some business owners who have been through previous, impossible investment partner arrangements with past companies, say its not even an option with their future or current business plans and operations.
- The idea to some business owners of all of their hard work, reputation, and family financial commitment to date, being at risk to the unknown quality of a new major financial partner coming in, is just too great to contemplate.
Have you considered:
Developing an RRSP/ TFSA eligible, Exempt Market PRIVATE INVESTMENT FUND – which you control – for your company’s future financial growth requirements?
Did you know:
- The Exempt Market was Federally Regulated throughout Canada in September 2010?
- 2/3rd of Canadian RRSPs are invested between September-November of any given year.
- In 2010, $33.9 Billion of RRSPs were invested across Canada – this does not include TFSA investments.
Do you own or operate:
a) An existing Corporation which is currently cash flowing, with viable business models and ideas for future development which will demonstrate Net Profits of $10M or greater after 5 years (on a pro forma statement). These Corporation will also have assets which are 100% available for securitization – these projects are considered as ‘business expansion’.
b) A brand new Corporation which is not currently cash flowing, but has enough seed capital for Investment Fund Development services. These new Corporations are initiated with viable business models and ideas which will demonstrate similarly on a pro forma (Net Profits of $10M or more after 5 years) and will acquire assets from the future investment proceeds, which are 100% available for securitization. The management teams of these new Corporations have been historically successful in the same, or similar industries – these projects are considered ‘second (or third) phase”.
The following list of activities are required for the development of a private equity investment fund for your company- supported by an Offering Memorandum – which include all the services necessary to sell your company’s private investment fund to the Canadian RRSP and TFSA market.
*NB – Please allow your company 6 months on average, to complete these activities prior to being able to “sell” your packaged investment to the RRSP/ TFSA marketplace across Canada.
These services include, but are not limited to:
Larger companies with gross sales upwards of $10M which are struggling with continued organic growth ($10M is statistically the gross revenue level where most companies seek equity for a boost beyond where they can organically grow to) and prefer, through experience, their own private source of funds which only they control, for some of the following reasons:
a) Management is already successful and do not want to risk “going public’ for fear of being ‘pushed out’ by the typically notorious need for a more higher profile management team to secure public investor confidence/ appearances.
b) Current owners and board of directors not only remain in full control of their company, they have the ability to take their time in deciding how much of the company they only wish to offer to the private equity investors which the exempt market is made up of..(exempt market investors typically invest based upon the targeted dividend yield of the investment offering, and if reached and maintained, will remain long term investors – this is typical of the RRSP investment attitude).
c) Offering Memorandums and the Exempt Market is very much like an “incubation” stage for the companies and owners who have never really had equity ‘partners’ before. Not only can they control when and how much investment they ask for and take their time to be careful how they use the investment monies, they can also decide when to put the company into a big push for a higher cap rate. This then provides the ultimate opportunity in growing/ owing a company and strategizing when the owners want to go to the public market for the optimum Corporate Exit Plan and payout.
This excerpt was taken from a BC Securities Commission Service Plan 2011-2014 report to Ottawa regarding the Exempt Marketplace:
The “exempt market” comprises those selling and buying securities in circumstances where the usual prospectus and registration requirements do not apply, usually because the buyer is sophisticated in investment matters, is wealthy enough to withstand loss, or is a relative or friend of the seller
The exempt market is extremely important to small business capital raising. It is where almost all start-up companies raise their capital until they are big enough to go public.
Even after going public, listed companies, especially those in the junior market, continue to rely on the exempt market to raise capital.
Ensuring market integrity in the exempt market is vitally important, and challenging.
Thousands of businesses and investors participate in it. No central agency provides oversight and there are few disclosure requirements. There is no real time trade reporting as is the case with exchange listed stocks. Investor risk increases when issuers do not comply with requirements.
We hope this information helps to answer some of the questions you may have when considering this option for your company, as well as to provide some more background information to this newly Canadian Federally Regulated industry.
Bailey Business Funds looks forward to being of assistance; please do not hesitate to contact us for more information or further inquiries you may have.
Questions? – give us a call: 604-889-1799