Private Capital Q2 2014 by Private Capital

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CONTENTS COVER FEATURE

ARTICLES

CVCA Milestones Visual history of CVCA over 40 years

FATCA Update How FATCA is affecting Canadian firms By Dan Lundenberg

SPECIAL EVENT

Positioned to Succeed Preview of CVCA’s 2014 annual conference By Wally Hunter

DEPARTMENTS

President’s Message and Interview with New CEO

By Tim Kiladze

CVCA Board of Directors and Management

8 10 12

Fund News People on the move

The Succession Conundrum Finding the right person to take over By Jenifer Bartman

By Peter van der Velden

Immigrant Investor Capital How to Fix Canada’s Immigrant Investor Program

Do Not Underestimate the Impact of Crowdfunding The benefits and risks of crowdfunding By Gilles Duruflé

Published by

701 Henry Ave. Winnipeg, MB R3E 1T9 Phone: 204-953-2189 Fax: 204-953-2184 www.lesterpublications.com President, Jeff Lester Vice-President & Publisher, Sean Davis EDITORIAL

Top Deals in 2013 Top 25 Venture Capital and Private Equity deals

Editorial Director, Jill Harris Editorial Assistant, Andrew Harris ADVERTISING Sales Director, Danny Macaluso Stephanie Allen, Nicole Hnatiuk, Larry Kiska, Louise Peterson, Darryl Sawchuk, Amanda Thomas

Private Capital Pioneer Insights An interview with past CVCA president, Robin Louis (2003–2005)

DESIGN & LAYOUT Art Director, Myles O’Reilly Crystal Carrette, Jessica Landry, John Lyttle, Gayl Punzalan

By Steven Hnatiuk

EDITORIAL BOARD Chair: Steve Hnatiuk, Lighthouse Equity Partners Chris Arsenault, iNovia Capital Jenifer Bartman, Bartman Business Advisory Grant Kook, Westcap Management Lauren Linton, CVCA Robert Montgomery, Achilles Media Rick Nathan, Kensington Capital Partners Gary Rubinoff, Summerhill Venture Partners Gregory Smith, InstarAGF Asset Management David Unsworth, RBC Venture Partners Peter van der Velden, Lumira Capital Mike Woollatt, CVCA

What’s On CVCA upcoming events

ACCOUNTING Nikki Manalo

CVCA Membership Benefits & Information Request Form

DISTRIBUTION Jennifer Holmes

Comments, questions and submissions are welcome, please send to the editor at privatecapitaleditor@cvca.ca

Please follow CVCA on LinkedIn, Twitter and Facebook

© Copyright 2014 CVCA. All rights reserved. The contents of this publication may not be reproduced by any means, in whole or in part, without the prior written consent of CVCA. Direct requests for reprint permission should be made to the president of Canada’s Venture Capital & Private Equity Association. Statements of fact and opinion are the responsibility of the authors alone and do not imply an opinion on the part of the officers or members of the Canada’s Venture Capital & Private Equity Association or Lester Communications Inc. Publication Mail Agreement #40606022 Return undeliverable Canadian addresses to: 701 Henry Ave., Winnipeg, MB R3E 1T9

Private Capital § Quarter 2 § 2014

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PAST PERFORMANCE. FUTURE UNCERTAINTY. WHAT IS THE BUSINESS WORTH NOW?

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CEO Interview

Peter van der Velden,

President, CVCA

Meet Our New Chief Executive Officer Interview with CVCA’s First CEO

s president of CVCA, it is my great pleasure to use this edition of Private Capital and CVCA’s annual conference to introduce CVCA’s first CEO, Mike Woollatt. Mike joined us a mere 10 weeks ago, but I am sure that start date feels like a distant memory. Not only have we dropped a big agenda on his lap, but he came to the organization with a vision about where he wants to go over the next couple of years. I am excited for CVCA and for our members. Mike shares our vision and passion for 1) expanding our community engagement into colleges and universities that will be the source for this country’s future leaders, innovators and entrepreneurs; 2) value-adding to our membership through professional development events and data and research that is second to none in North America; and 3) building our brand and franchise with all of our key stakeholder communities. These are exciting times for CVCA. We have a lot of work to do, but with the strength and breadth of our membership, an incredibly engaged group of member volunteers who drive and co-ordinate all our committee activities and with Mike in his new role as CEO, I fundamentally believe we are well positioned for a productive and fun future. Rather than steal any more of Mike’s thunder, let me conclude by inviting you to read an interview with Mike below. CVCA’s first CEO, Mike Woollatt

Sincerely, Peter van der Velden, President, CVCA Managing General Partner, Lumira Capital

How are you enjoying your time at CVCA so far? Mike Woollatt: Immensely. I am learning as I go, and at times it feels a bit like drinking from a fire hose, but it has been great. Meeting our members is the highlight for me. I’m learning the most from them and get more energized with each conversation. I’ve been touching base with as many members as possible, including joining Peter in some networking events across the country. Networking is a key value component of being a part of our association and I will keep looking for ways to increase networking opportunities for our members.

How do you feel your previous experiences will help you in directing the evolution of CVCA? MW: Everyone always says they’re a good fit for the role, but in this case I feel like it’s just that much more true! I have experience on the public policy side working as an economist with the Government of Canada. I did research and forecasting on the Canadian economy and the importance of productivity, innovation and growth of Canadian businesses. In my new role I now represent an entire industry that is at the helm of driving those forward. So for me, it’s fun and a natural fit.

I will also be able to draw on my experience in public affairs and politics. And, as an entrepreneur myself, I experienced the trials and tribulations of starting a couple of businesses – something many of our members spend a fair bit of time involved with.

What factors do you feel are important for the success of an association? MW: I think associations are all driven by relevance – relevance to their members, relevance to the engaged public and relevance to decision makers and stakeholders. And those three pillars lean on each other. Private Capital § Quarter 2 § 2014

CEO Interview

“Associations can, at times, make the mistake of not viewing themselves as a business, but rather as a club. That can lead to stagnation.” – Mike Woollatt, CEO, CVCA

Without relevance to any of those three sectors, you lose relevance to the others. So what is relevance? It boils down to consistently generating value to each of those pillars. For instance, value to our members comes through networking, thought leadership, research and demonstrative proof points on advocacy and public affairs work. Associations can, at times, make the mistake of not viewing themselves as a business, but rather as a club. That can lead to stagnation, too much inward focus, and even a lack of professionalism. I view our association as a not-for-profit in tax status only. We are a business, just like anyone else. And our members are our customers. The only difference, I believe, is that our relevance is our commodity.

CONSTANTINOSZ/SHUTTERSTOCK

How do you view the state of the industry in Canada? MW: Well, I am still learning, but I am hearing from a lot of our members about this. Our members are bullish about the current opportunities for private equity in Canada but, on the concerns side, what I hear most consistently is that for venture capital there continues to be a lack of domestic capital for certain stages and segments of the business.

Private Capital § Quarter 2 § 2014

More broadly, I think there are concerns about a lack of awareness about the hugely positive impact of private capital on the Canadian economy, evolving business models that drive capital scarcity for all segments of the independent private equity ecosystem and finally the need to continue to foster and grow a culture of entrepreneurialism in the Canada. These are all very important themes that CVCA has been focused on for some time with a great deal of success in some areas, and that we are now looking to find new and innovative ways to address with concrete solutions and proposals. I am going to continue pushing these messages and finding ways to help our members succeed. At the end of the day, we have to effectively communicate why these issues exist and why Canadians should care. And if we do that effectively, it will go a long way to helping us make headway for our industry.

What are you looking forward to most now that you are a part of CVCA? MW: The Annual Conference will be my first opportunity to connect with the full breadth of our membership and stakeholders, and hear their views on the issues and

opportunities. That will help me lay the foundation for how we guide CVCA through the next phase of its growth. I see so many opportunities to increase the reach and scope of CVCA. In the short-term, our members will see a roll out of a more in-depth, accurate and comprehensive research and data service, as well as a new look and functionality to CVCA website, which is very exciting. As you can tell, I’m excited about this and honoured to be given the opportunity to lead the next phase of CVCA’s growth.

Mike Woollatt is CVCA’s first chief executive officer. Prior to joining CVCA, he co-founded Beaconsfield Group, a successful management consulting and public affairs firm. Mike has held senior executive roles at various major Canadian corporations, including Bell Canada, CTVglobemedia and Canwest Global Communications. Before entering the private sector, Mike worked for the Government of Canada, both as an economist in the bureaucracy and as a political advisor at the Department of Finance. He has also worked overseas as an economist on international development projects. Look for the “CEO’s Message” in future Private Capital issues.

CVCA 2013 – 2014 Board and Management Officers President: ..................................................... Peter van der Velden, Lumira Capital Chair: ............................................................ Gregory Smith, InstarAGF Asset Management Inc. 1st Vice President: ...................................... Dave Mullen, Graycliff Partners Treasurer: .................................................... Pierre Schuurmans, Birch Hill Equity Partners Secretary: ..................................................... Gary Solway, Bennett Jones LLP

Vice Presidents Jocelyn Blanchet.......................................... KPMG LLP Gilles Duruflé............................................... Independent Consultant Sarah Goel ................................................... EdgeStone Capital Partners Tom Hayes ................................................... GrowthWorks Atlantic Edmund Kim................................................ ONCAP Grant Kook ................................................... Westcap Mgt. Ltd. Jeff Linner .................................................... PFM Capital Karamdeep Nijjar........................................ iNovia Capital Michael Raymont......................................... AVAC Ltd. Paul Sparkes................................................. Difference Capital

Directors John Berton................................................... Georgian Partners Richard Bradlow.......................................... Penfund Ross Bricker.................................................. RB Limited Joe Catalfamo............................................... Summerhill Venture Partners Paul Day........................................................ Export Development Canada Alain Denis................................................... Fonds de solidarité (FTQ) Howard Donaldson..................................... Vanedge Capital Joe Freedman............................................... Brookfield Asset Management Aki Georgacacos.......................................... Avrio Capital Michael Hollend........................................... TorQuest Partners Wally Hunter................................................ EnerTech Capital Lorne Jacobson............................................ TriWest Capital Partners Tom Kennedy............................................... Kensington Capital Partners Elmer Kim..................................................... Roynat Equity Partners Genevieve Morin.......................................... Fondaction Don Morrison............................................... Novacap Dave Mullen................................................. Graycliff Partners Jerome Nycz................................................. BDC Whitney Rockley.......................................... McRock Capital Jane Rowe..................................................... Teachers’ Private Capital John Ruffolo.................................................. OMERS Ventures Rakesh Saraf................................................ Alberta Teachers’ Retirement Fund Pierre Shuurmans ...................................... Birch Hill Equity Partners Lloyd Segal................................................... Persistence Capital Partners Gregory Smith.............................................. InstarAGF Asset Management Inc. Edward Truant............................................. Imperial Capital Mark Usher .................................................. Wellington Financial LP Peter van der Velden................................... Lumira Capital Mike Walkinshaw........................................ Stanley Hill Michael Woolhouse..................................... CPPIB

Management CEO:............................................................... Mike Woollatt Director of Marketing:................................. Lauren Linton Director of Operations: .............................. Kathryn Ryan Research Director:....................................... Ted Liu International Trade Liaison Officer:........... Andrew Keenan

Private Capital § Quarter 2 § 2014

› fund news

Onex Partners IV: target in sight

LX Ventures to raise $3M for portfolio

TDG Capital Partners launches new $50M private equity fund TDG Capital Partners, an Edmonton-based private equity and advisory firm, has launched its premiere fund, offering TDG Capital Partners I. The new fund, which has a target of $50 million, will focus on making control-stake investments in private, small and medium-sized businesses with a valuation in the range of one million to 15 million dollars. Companies of interest may be located in Canada and the U.S., as well as in a variety of sectors, with the exception of early-stage technology, medical industries and real estate.

Onex Partners IV approaches fund target with $3.7B raised to date Onex Partners IV has raised a total of US$3.7 billion in capital commitments to date, according to the fund manager’s Canadian private equity firm Onex Corp. That puts the firm’s flagship partnership, launched in 2013, within reach of its US$4.5-billion target. Fund IV is expected to reach its final close by mid-2014.

Anges Québec Capital Fund gets $25M top-up commitment Anges Québec Capital Fund, an early-stage venture capital fund managed by Anges Québec (AQ), has been promised new commitments in the 2014-2015 Quebec budget, tabled on Feb. 20 by finance and economy minister Nicolas Marceau. The budget specified a $25-million commitment to Anges Québec Capital Fund. That is on top of the $30 million the fund received at the time of its formation in 2012. Then $20 million in commitments 8

Private Capital § Quarter 2 § 2014

Imperial Capital exceeds $250M target

came from Investissement Québec, while $10 million came from angel investors.

LX Ventures to raise $3M to grow recent technology acquisitions LX Ventures, an accelerator that acquires, integrates and supports high-growth technology companies, is undertaking a private placement offering to raise up to $3 million. Funds raised will be used to accelerate the growth of companies recently added to LX Ventures’ portfolio.

Imperial Capital Group closes Fund V ahead of target, raises $295M Canadian private equity firm Imperial Capital Group has closed its fifth fund, Imperial Capital Acquisition Fund V, raising $295 million in total. Fund V exceeded the $250-million target set for it and attracted more than 200 Canadian and global high-net worth investors who have committed alongside institutional investors. Imperial’s latest fund also raised well over twice the commitments made to its previous fund, closed in 2009. Imperial makes control-stake investments in lower mid-market companies in Canada and the U.S. Enterprises most often have EBITDA in the range of $5 million and $15 million.

Renewal Funds raises $63M in final close of social venture fund Renewal3 Canadian venture capital firm Renewal Funds has raised a total of $63 million in the final close of its third fund, Renewal3. The fund, which is focused on

EnerTech partners with IREQ

investing in early-stage growth companies in organic and natural foods, green products and environmental and social innovation sectors, received capital commitments from individual investors, families, foundations and institutional investors based in Canada, the U.S. and Europe.

Fed unveils $300M new VC funding under Digital Canada 150 initiatives Through the Business Development Bank of Canada (BDC), the Federal government will invest $300 million in venture capital for digital companies and $200 million to support small and medium-sized businesses with digital technology adoption.

Sun Life launches three private asset class pooled funds Sun Life Investment Management Inc. has launched three pooled funds that focus on private fixed income, commercial mortgages and real estate assets, to be available starting April 1, 2014. The three funds are being launched with seed portfolios of assets totaling approximately $650 million contributed by Sun Life Assurance Company of Canada and Sun Life Financial Inc.

NL Government allocates $10M to Build Ventures and to establish NL VC fund Government of Newfoundland and Labrador will contribute $10 million to Build Ventures. The expanded $60 million Build Ventures now have the support of all four Atlantic provinces, and from BDC Venture Capital, Technology Venture Corporation. NL government will

Avrio Capital: focusing on ag

establish a NL specific focused early stage venture capital, Venture Newfoundland and Labrador Fund, in partnership with Growthworks Atlantic, the Newfoundland and Labrador Angel Network and others.

Avrio Capital plans $125M new fund Avrio Capital, a venture capital fund specializing in agriculture and food technology investment opportunities, is raising a $125 million new fund focusing on innovative agriculture and food companies.

Fiera Capital launches accredited investor Infrastructure Fund Fiera Capital Corporation has launched Fiera Private Infrastructure Fund, providing Canadian accredited investors with access to investments in core infrastructure assets, previously only available to institutional and private wealth investors.

EnerTech Capital forms partnership with Hydro-Québec Research Institute (IREQ) EnerTech Capital has entered into a strategic collaboration agreement with Hydro-Québec Research Institute (IREQ) pursuant to which EnerTech and IREQ will work together in the field of technologies servicing the electric power industry. The two groups will share knowledge and explore new commercialization strategies for technologies within IREQ and through EnerTech’s global network investment opportunities in the power industry.

STOCK IMAGES: GETTY & SHUTTERSTOCK

Feds invest in digital companies

Private Capital § Quarter 2 § 2014

› people on the move

CPPIB hires 3i’s Cressida Hogg Canada Pension Plan Investment Board, one of the world’s biggest pension fund investors, has recruited the managing partner of UK private equity firm 3i’s infrastructure business, sources familiar with the matter told Reuters. Cressida Hogg will take a senior role in CPPIB’s infrastructure program and will be based in London, the sources said on Wednesday. Her recruitment comes after CPPIB chief executive Mark Wiseman said the firm expects more infrastructure and private equity investment opportunities in 2014.

Cycle Capital brings on Shirley Speakman as partner Shirley Speakman has joined Canadian venture capital firm Cycle Capital Management as partner. Since 1995, Speakman has held several positions as an investment analyst for medium- to large-sized corporations in the

finance sector. Most recently, she was responsible for sourcing, vetting and managing investments as a director of MaRS Investment Accelerator Fund. Based in Montreal, Cycle Capital invests in companies focused on clean technologies, reducing greenhouse gas emissions, optimizing resource use and improving process efficiency throughout a product’s life cycle.

Hatchbrands Ventures hires Janeczek as new partner Hatchbrands Ventures, an internet accelerator and microfund based in Ottawa, has hired Marco Janeczek as venture partner. Janeczek’s experience includes working at H-FARM and First Stone Ventures. Hatchbrands Ventures was recently bought by iBrands Corp, a Roswell, Ga.-based holding company that acquires and operates niche market brands.

Northleaf bulks up global investment team Canadian private markets fund manager and adviser Northleaf Capital Partners has added four new members to its global investment team. Nadim Vasanji joins the firm as vice president on the global private equity team and will be based in Northleaf’s Menlo Park, Calif., office. Megan McLeese joins as legal counsel, while Chris Rigobon and Brad Blowes join as associates with the infrastructure and private equity secondaries teams, respectively. McLeese, Rigobon and Blowes will be based in the firm’s headquarters in Toronto. Northleaf manages $5 billion in assets on behalf of a wide array of institutional investors.

LX Ventures taps former Microsoft exec for advisory board LX Ventures said recently that it has named Mark Relph to its board of advisors. Relph, the former vice president of developer evangelism for Microsoft Canada, will be working with portfolio company Copper.io, a provider of tools that help deploy, operate and monitor cloud-based apps. Based in Vancouver, B.C., LX Ventures acquires and accelerates high-growth technology companies. LX Ventures bought the Las Vegas, Nev.-based Copper.io earlier this year. Shirley Speakman

Private Capital § Quarter 2 § 2014

Difference Capital appoints Art Mesher to board Difference Capital Financial Inc. (TSX: DCF) has appointed Art Mesher, former Chairman and CEO of Descartes Systems Group, to its board of directors, effective April 2, 2014.

Kent Thexton

OMERS Ventures hires Kent Thexton as managing director

Robert Parizeau

Fonds de solidarité appoints Robert Parizeau to board Fonds de solidarité FTQ has officially appointed Robert Parizeau to its board of directors following the approval by the General Council of the FTQ. A FTQ-affiliated person has resigned to make room for Parizeau. In May, Parizeau will assume the chairmanship of the board, a position he will hold until September 2015, after which he will remain a member of the board.

OMERS Ventures has hired Kent Thexton as managing director. Thexton, formerly chief data and marketing officer and board member at UK telecom firm O2 Group plc, will be responsible for leading investment activities in the North American market focusing on high-growth companies in the technology, media and telecommunications sectors.

Innovacorp promotes Phipps to managing director of investment Innovacorp has recently promoted Gregory (Greg) Phipps from director of investment to managing director of investment. Private Capital § Quarter 2 § 2014 11

Private Capital Pioneer Insights An interview with Robin Louis, CVCA past-president (2003 – 2005) By Steve Hnatiuk, Lighthouse Equity Partners

obin Louis is quick to point out, although I respectfully disagree, that he is not in fact a pioneer of the Canadian private capital industry. “The industry started 20 or 30 years before I became involved in VC in 1991,” is Robin’s upfront caveat. Admittedly, 1991 might not have been the dawn of the private capital industry in Canada, but it coincides with the beginning of a period of great growth and professionalization of venture capital and private equity as asset classes. A lot has happened in the past two decades, and whole new generations of GPs are now driving venture and PE firms across Canada. And, as you will find in Robin’s comments, there are lessons to be learned from the past. I caught up with Robin in Vancouver recently to talk

Private Capital § Quarter 2 § 2014

about his time as CVCA president – now a decade ago – and to share insights and perspectives on the evolution, opportunities and challenges facing the industry. Now retired, Robin spent much of the prior 20 years fundraising, investing and building Ventures West – the largest private independent Canadian venture fund management firm of its era. How do you feel about your time as head of CVCA and as an investor in the Canadian market? Robin Louis: Venture capital is a wonderful occupation – you get to work with great people and follow interesting ideas. There is lots of variety and, if you do it well, you make lots of money.

Pioneer Insights

“ In Canada it is easier to buy established, well-managed companies with decent growth prospects in traditional industries – the PE model – than to build global market-relevant technology companies – the VC model.” – Robin Louis

Would you do it all over again? RL: Yes. However, since retiring I have been doing a fair amount of angel investing and that is even more fun. You don’t have to worry about what your partners or LPs think. You can just do your own thing. Hot sectors then vs. now. Any observations? RL: There are always hot sectors and they seem to change frequently. The whole idea of “hot” to me implies a sector that is going to attract too many companies and too much money and therefore will become highly competitive and over-valued. Rather than looking for hot sectors, I prefer to look for products and businesses that have enduring value to the customer. Then you have time to build a company and find someone to give you liquidity for it.

Where do you think the best returns in private capital investment will come from over the next decade? RL: The best returns in Canada have historically come from private equity, not VC. I think that there are two reasons for this. First, the market for PE deals, particularly small deals, has been relatively less competitive. Second, in Canada it is easier to buy established, well-managed companies with decent growth prospects in traditional industries (the PE model) than to build global marketrelevant technology companies (the VC model). What is the most significant way that the PE and/or VC industry changed since you were CVCA president? RL: It seems hard to believe now, but PE was not a big part of CVCA as recently as my time as president a decade ago. At that time, Labour Sponsored Investment Funds (LSIFs)

Private Capital § Quarter 2 § 2014 13

Pioneer Insights

were a large part of the industry – they were raising and investing more than the private firms. There was a lot of “debate” about whether tax driven investment vehicles, and specifically LSIFs, were good or bad for the VC industry. The sources of capital are different today; that’s a big change in the last 10 years. Back then it was individuals (through LSIFs) and pension funds that supplied the capital. Now, the LSIFs are basically gone (except in Quebec) and many of the pension funds are no longer investing in VC funds. New sources of capital have appeared – for both funds and direct investment – predominantly government related. What were the biggest challenges our industry faced during your time as CVCA president? RL: The arguments between the LSIFs and the private firms distracted us. We should have been focused on the fact that the industry was not generating adequate returns – in many ways, we were repeating the mistakes that had been made in each of the previous two decades. A lot of effort was spent trying to prevent CVCA from splitting in two. What are your views on Canada’s largest institutional investors/pension funds establishing active direct investing programmes? RL: I don’t understand why they bother with direct investing in VC. I don’t believe they can deploy enough money to have a significant impact on their returns, even if their investments are very successful. But having their own direct investment operations does have the benefit of showing these institutions to be supporting entrepreneurship and innovation. Investing in funds would seem to be a more efficient approach for large pension funds; it allows them to put more money to work with much less effort, but that approach has not worked well for them in the past. What are your thoughts on the geographic scope of investing and fundraising then vs. now? RL: One of the errors of the past was that there were many funds that had geographic investment restrictions imposed on them by their sources of capital. Success is driven by investing in companies that become leaders in their field. To have access and to recognize these companies, the VC investor has to be looking everywhere that such companies might be found. On the fundraising side, most of the money raised by Canadian VC funds historically came from individuals and pension funds in Canada – sources that have mostly disappeared. In the short term, the Canadian government supported VCAP funds of funds, BDC and EDC are going to be big sources of capital. Hopefully these government sources of capital will support Canadian VC funds that generate performance so that these funds can subsequently raise capital globally, and entice Canadian pension funds back into the asset class. 14

Private Capital § Quarter 2 § 2014

Robin Louis at the 2005 CVCA Conference

What advice would you give to GPs who are building their firms today? RL: Start by looking at the track record of the VC industry – it is horrible. This is not just a Canadian problem – VC returns are poor everywhere except for a small number of elite firms. Lots of smart people have worked very hard but generated poor results. If you are going to be a successful GP, you have to have a really good idea of how and why you expect to do better and a plan to achieve this. You are going to have to be able to sell your idea to the sources of capital. Any other comments or insights you’d like to share with investors in, and influencers of, the private capital business today? RL: There were two bust to boom cycles during my time in the industry. When I entered the industry in 1991, VC was out of favor because substantial amounts of money had been raised in the 1980s and in general had not generated good returns. Through the 1990s, VC gradually became a respectable asset class again and substantial amounts were again raised, culminating in peaks in both amounts raised and invested in 2000 and 2001 in the $4 billion range. But then the end of the technology bubble marked the end of that decade and resulted in reduced returns and the exit of many investors from the asset class. Since then, the industry has settled at a more sustainable $1.5-billion per year range. Hopefully we will see gradual, sustainable growth in both amounts raised and amounts invested. And hopefully we have learned enough from the previous boom and bust cycles to generate returns that will justify the continued existence of the venture industry in Canada.

Steve Hnatiuk is chair of Private Capital magazine’s editorial board and a member of CVCA’s Government Relations Committee. Steve is managing partner of Lighthouse Equity Partners, a buyout firm focused on lower middle market businesses located in Western Canada.

› what’s on Upcoming CVCA events CVCA organizes a comprehensive suite of events: professional development, annual conference, regional networking events, Young Private Capitalists, Canadian Women in Private Equity, CFO – all focused on delivering unparalleled industry insight, debate and networking opportunities. ›› May 20 – 22, 2014 – Ottawa 2014 ANNUAL CONFERENCE ›› June 5, 2014 – Toronto Canadian Women in Private Equity (CWPE) and Women in Capital Markets Reception and Dinner ›› June 5, 2014 – Halifax – Professional Development Seminar and Reception “Silicon Valley Secrets: Why Make The Trip?” ›› July 23, 2014 – Toronto Professional Development Lunch and Learn “Maximize Your Investment By Evolving Your Brand: How Cineplex is redesigning entertainment in Canada” featuring keynote speaker Ellis Jacob, President & CEO, Cineplex Entertainment ›› August 27, 2014 – Toronto CVCA’s Annual Charity Golf Classic

Check online for newly added events Visit www.cvca.ca/news/events for details and more current events.

Private Capital § Quarter 2 § 2014

Showcase Your Expertise to CVCA Members! Host a CVCA Professional Development Seminar in Your Office We invite our members to host Professional Development breakfast or lunch events in your own offices. The only cost to you is the use of your office space and the cost of the breakfast or lunch. We will manage the marketing and registration. Interested? Please contact Lauren Linton, CVCA’s Director of Marketing at llinton@cvca.ca

Driving innovation and growth TELUS Ventures is the strategic venture investment arm of TELUS. Since 2001, we have partnered with high potential, privately owned companies that offer unique technologies and innovative products that accelerate growth initiatives within TELUS. Areas of particular interest include Health IT, Big Data, Mobility and IT Security. Our team drives success for portfolio companies by actively facilitating relationships within TELUS and across our network of partners. “On behalf of TELUS and TELUS Ventures, congratulations to the CVCA for 40 years of exemplary service to the Canadian Private Equity and Venture Capital ecosystem.” Mathew George, Vice president and Head of TELUS Ventures

Learn more or submit your business proposal at telus.com/ventures Or via e-mail at venturesinfo@telus.com

CVCA MILESTONES MEMBERSHIP

GROWTH

COUNT OF INDIVIDUAL MEMBERS 1975 – 16 members 1980 – 27 members 1985 – 90 members 1990 – 120 members 1995 – 164 members 2000 – 170 members 2005 – 191 members 2010 – 210 members 2013 – 215 members

1974 – The CVCA was formed under the original name Association of Canadian Venture Capital Companies (ACVCC) by 5 directors.

1976 – $100 million invested in Canada by Canadian VC companies over the past 15 years = 22,000 new jobs

1985 – First western President – Archie MacKinnon from Calgary

1991 – 1st Entrepreneur of the Year Award winner – John Hokanson of the PTI Group

1999 – Deal of the Year Award established – 1ST is HotHaus Technologies

1995 – Increased the board from 12 to 20 to better reflect its members 1987 – Toronto Conference keynote speaker Pierre Elliott Trudeau. 600 attendees

1995- formed alliance with Sharwood Golf Classic

1 9 7 4 • • • • • 1 9 8 0 • • • • 1 9 8 5 • • • • 1 9 9 0 • • • • 1 CVCA PRESIDENTS OF THE 1970s

CVCA PRESIDENTS OF THE 1980s

CVCA PRESIDENTS OF THE 1990s

1974 – 1976 Gerald D. Sutton, Chairman, Framfield Oil and Gas Ltd.

1981 – 1983 Brian Marshall, President, Shadowfax & Associates Ltd.

1991 – 1994 R.A. (Sandy) Slator, President & CEO, PTI Group

1976 – 1979 Paul J. Lowenstein, Chairman, Canadian Corporate Funding Limited

1983 – 1985 Earl Storie, Managing General Partner, VenGrowth Private Equity Partners Inc.

1994 – 1996 Peter R. Forton, Managing Director, CAPE Fund

1979 – 1981 George Felis

1985 – 1987 Archie MacKinnon, Managing Director, SutterHill Capital Corporation

1996 – 1998 Edward G. (Ted) Anderson, President, Ventures West Management Inc. 1998 – 2000 Ron Begg, Rabco Canada Management Ltd.

1987 – 1989 John Puddington

LEGEND Conference milestone CVCA milestone CVCA Past Presidents

1989 – 1991 Marc Vaillancourt, Managing Partner, Stable Capital Advisors Inc.

1980 – Toronto conference – 190 attendees

1981 – Calgary conference – 156 attendees

1983 – Montreal conference

Private Capital § Quarter 2 § 2014

1987 – Vancouver conference – 550 attendees

1987 – VC invested 279 deals, $505 million

1989 – Quebec City conference

1994 – Joint conference with Reseau Capital in Montreal

1988 – Halifax conference, speaker Premier Frank McKenna 1995 – New name: Canadian Venture Capital Association (CVCA) 1988 – New record – $300 million in venture capital invested

TRUDEAU PHOTO © CHILOA / WIKIMEDIA COMMONS, CLARK PHOTO © VIANNEY (SAM) CARRIERE/FLICKR.COM

2000 – New record – Canadian VC industry 132% increase to $6.3 billion in capital invested

2000 – RECORD! VC invested 1,332 deals, $6.7 billion

2003 – CVCA officially adds tagline to its logo “Canada’s Venture Capital & Private Equity Association”

2003 – Full-time Executive Director hired – Richard Remillard

2001 – RECORD VC Fundraising hit $3.99 billion

2010 – CVCA meets with PM Harper

2008 – Launch of CVCA’s own quarterly Private Capital magazine

2003 – PD keynote Speaker – The Honourable Allan Rock, Minister of Industry

2012 – Montreal conference blackberry playbooks given to all conference attendees

2010 – CVCA releases its “Think Canada Again” report to attract foreign investors

2008 – CVCA report – Buyout Funds add $25 to $30 billion to Canadian economy in past 5 years

2001 – PD Keynote speaker The Right Honourable Joe Clark

2012 – CVCA Success – Federal government announces $500 million commitment to industry

2010 – Ottawa conference Rick Mercer

2008 – Montreal Conference SOLD OUT at 570 attendees

2010 – Largest European leveraged buyout $4.7 billion acquisition of Tomkins by a team of Canadian investors, including members CPPIB and ONEX

2013 – CVCA Success – Federal Government rolls out the Venture Capital Action Plan

2013 – Banff conference keynote speaker Mark Wiseman of CPPIB

9 9 5 • • • • 2 0 0 0 • • • • 2 0 0 5 • • • • 2 0 1 0 • • • 2 0 1 4 2002 – First PE President – Brad Ashley, PRIVEQ Capital Funds

2000 – 2002 John Eckert, Managing Partner, Round 13 Capital 2002 – 2003 Bradley W. Ashley, Managing Partner, PRIVEQ Capital Funds 2003 – 2005 Robin J. Louis

2002 – 1st CVCA Annual Charity Golf Classic

2002 – PD keynote Speaker – The Honourable Paul Martin, Minister of Finance

2007 – PE invested 246 deals, $30 billion

2013 – CVCA and Conference Board in Canada release buyout impacts study

CVCA PRESIDENTS OF THE 2000s

2005 – 2008 Rick Nathan, Managing Director, Kensington Capital Partners Ltd. 2008 – 2012 Gregory Smith, President & CEO, Instar Infrastructure 2012 – Present0 P eter van der Velden, Managing General Partner, Lumira Capital

2006 – PE Fundraising $10.34 billion

2006 – Entrepreneur of the Year award winner Teresa Cascioli of Lakeport Brewing Income Fund

2013 – CVCA and Industry Canada release a groundbreaking report that highlights the positive impact of venture capital investment on the performance of Canadian firms

2009 – Calgary Conference – bull-riding

2009 –CFO Task Force launched

2009 – CVCA study on Impact of VC in Canada on Economy, Jobs and Innovation

2011 – 1st Aboriginal Private Equity Summit in Toronto

2011 – Vancouver conference launches 2007 – Henry Kravis of KKR keynote speaker and kilts worn by 450 attendees

CONFERENCE PHOTOS © JOHN EVELY

2014 – CVCA hires Mike Woollatt as its first CEO

2014 – CVCA CELEBRATES ITS 40TH ANNIVERSARY Membership now at • 215 full members • 1,800 individuals • Our industry managing in excess of $105 billion

Private Capital § Quarter 2 § 2014 19

BMO Capital Partners™

CLAIRVEST

Private Capital § Quarter 2 § 2014

YEARS

CANADA VENTURES

Private Capital § Quarter 2 § 2014 21

POSITIONED to SUCCEED!

On the eve of CVCA’s annual conference, Canada is not only the gold medal winner in hockey but we are truly the “Team Canada” of the Private Equity and Venture Capital world! By Wally Hunter, EnerTech Capital

Private Capital § Quarter 2 § 2014

2014 CVCA Annual Conference

Don’t miss hearing about what industry leaders have to say at the CVCA Annual Conference in Ottawa, May 20 to 22.

PRESSMASTER/SHUTTERSTOCK, SONGQUAN DENG/SHUTTERSTOCK

s chairman of the 2014 CVCA Annual Conference, I am very excited about this year’s event as we bring together leading experts in the Private Equity and Venture Capital sectors from across the globe and showcase how we in Canada have “all the right players on the team” and are positioned for success in the global world of Private Equity and Venture Capital. This year’s theme uses the exciting and dynamic world of hockey to convey how Canada’s VC & PE industries are positioned for success. The conference will showcase the offensive role our industry plays to stimulate businesses with winning and innovative strategies. The focus will be on great investment opportunities to score high returns. In addition to our slate of world-class speakers and panelists, we have a number of other exciting activities during the conference that are new this year: ›› CVCA Hockey Challenge – Investors vs. Ottawa Start-ups (Sponsored by Invest Ottawa) ›› Personalized hockey jersey from your favourite team (to be worn at the Gala evening) ›› Tesla Car test drive ›› Comedian Derek Edwards (voted Canadian Comedian of the year) ›› A series of hockey greats, including Darryl Sittler (circulate during the Gala dinner cocktail) ›› Caymus wine tasting CVCA members will congregate in Ottawa and the city provides the ideal setting for such a gathering. It has long-served as a symbol of Canadian excellence around the world in technology, combined with the backdrop of a government who has provided significant support for the

Wally Hunter, chair of CVCA’s 2014 Annual Conference in Ottawa

industry through their recent Venture Capital Action Plan (VCAP) program. With strong public and private sector commitments to both the VC and PE industries, Ottawa also defines itself as a global hub for entrepreneurship and investment activities. Canada’s entrepreneurial capital is fostering an environment that is conducive to creating opportunities by leveraging traditional industry expertise, access to capital and extended personal networks to carve out a global leadership position for both its entrepreneurs and investors. In many respects, Canada has become the envy of the world as we avoided the major economic downturn experienced by other countries and have continued to build on our many strengths including successful Venture investing in emerging technology companies in IT, life sciences, energy and agriculture across Canada. In addition, we have seen numerous Private Equity backed success stories in Canada, demonstrating the depth of the capital markets in Canada from Venture Capital through to growth stage Private Equity. It is appropriate at this year’s conference that we invite others to “Think Canada,” as we continue to build on the strong ecosystem and demonstrate to the world that we have a winning strategy in VC and PE. All eyes will be on Ottawa from May 20 to 22, to see if CVCA members are indeed up to the challenge and can position ourselves to “skate to where the new opportunities are” and win gold in the global stage of Venture Capital & Private Equity!

Wally Hunter is managing director at EnerTech Capital and is chair of CVCA’s 2014 Annual Conference in Ottawa.

Private Capital § Quarter 2 § 2014 23

FATCA U PDATE By Dan Lundenberg, Grant Thornton LLP (Canada)

he Foreign Account Tax Compliance Act (FATCA), enacted by the U.S. Congress in 2010, becomes operational on July 1, 2014, and while the Internal Revenue Service (IRS) has recently released some important guidance, many critical issues remain unresolved. As many readers likely know, FATCA requires foreign financial institutions (FFIs) to perform certain due diligence procedures to identify U.S. persons who have invested in either non-U.S. financial accounts or non-U.S. entities. The intent behind FATCA is to keep U.S. persons from hiding income and assets overseas, as U.S. persons are required to report to the IRS on their worldwide income regardless of their residency. The U.S. Treasury has entered into intergovernmental agreements (IGA) with many countries in order to alleviate some of the burdens associated with FATCA compliance. One key issue an IGA addresses is local country law restricting FFIs from providing the

Private Capital § Quarter 2 § 2014

requisite information to the IRS. Many Canadian FIs were on hold waiting for the U.S.-Canada IGA, which was finally released on February 5, 2014.

FATCA classification The definition of FFI in the Final Regulation includes an “investment entity.” An investment entity includes a nonU.S. entity that functions or holds itself out as a “collective investment vehicle” and specifically includes a private equity fund, hedge fund, venture capital fund or any similar investment vehicle established with an investment strategy of investing, reinvesting or trading in financial assets. Thus, under the FATCA final regulations, Canadian venture capital (VC) and private equity (PE) funds are impacted by FATCA. The draft Canadian legislation necessary to implement the IGA has muddied the waters in Canada, as it appears

FATCA

We have recommended registration where a fund satisfies the investment entity definition in the final FATCA regulations.

FATCA registration NOTE: This article was written before the IRS’s May 5, 2014 deadline for FFIs to register on the FATCA Portal. Registering FFIs will receive a Global Intermediary Identification Number (GIIN) and will be on the first list of registered FIs that the IRS will publish on June 2, 2014. Many Canadian VC and PE funds have been diligent in reviewing their FATCA classification and in determining whether registration is necessary. Many funds could qualify for “registered deemed compliant” status if they qualify under the narrow confines of the “qualified collective investment vehicle” or “restricted funds” definitions. Each has many conditions to satisfy and space constraints do

APERTURE51/SHUTTERSTOCK

that such draft legislation significantly narrows the application of FATCA in the Canadian marketplace. The definition of FI in the draft Canadian legislation would exclude many entities otherwise thought to be required to register and comply with FATCA as FIs. While this would appear to benefit many Canadian entities, such narrow interpretation has caused some uncertainty in Canadian business circles. A U.S. withholding agent that knows or has reason to know that a claim for exemption from withholding is unreliable or incorrect is not permitted to rely on it. A Canadian entity taking the position that it is not an FI (and thus a Non-Financial Foreign Entity), but appears to be an FI under the U.S. regulations and under the IGA, may have issues in dealing with U.S. withholding agents; U.S. withholding agents may decide not to rely such Canadian entity’s Form W-8 BEN-E and impose 30 per cent withholding on such entity’s U.S. source income.

Private Capital § Quarter 2 § 2014 25

FATCA

The intent behind FATCA is to keep U.S. persons from hiding income and assets overseas. not allow us to delve into the details. Qualifying FFIs are able to avoid the full compliance burden of FATCA, though registration is required (and renewed every three years) and we recommend that qualification be documented. At a very high level, these categories apply to registered investment funds whose investors are entirely composed of non-U.S. persons. To qualify as a registered deemed compliant FFI, qualified collective investment vehicles can only have participating FFIs, deemed compliant FFIs or other exempt investors. Restricted funds may have nonFFI investors but strict constraints are required to avoid any U.S. investment in the fund. Canadian VC and PE funds that are required to register and who will be receiving U.S. source income after June 30, 2014 should have registered on the FATCA portal; those who have not risk being subject to 30 per cent FATCA withholding on their U.S. source income and will have to consider the issues associated with recovering the withholding tax. Those who have not registered and are not expecting U.S. source income immediately after the July 1, 2014 can still register, as the IRS will be updating its list of registered FFIs periodically.

R. MACKAY PHOTOGRAPHY, LLC/SHUTTERSTOCK

Revised registration Q&A

The IRS recently released additional FATCA frequently asked questions and answers. One of particular interest to VC and PE funds address the mechanics of how a “Sponsoring Entity” registers a “Sponsored Entity.” This is relevant in many circumstances, including, for example, when a sponsor wants to sponsor its various funds. The sponsoring entity provisions allow a fund sponsor to undertake FATCA compliance and due diligence procedures on behalf of its funds. The mechanics of how this would work on the FATCA portal were not clear. In the FAQ, the IRS states that, until January 1, 2016, a Sponsored Entity can provide the GIIN of the Sponsoring Entity and that the Sponsored Entity need not separately register on the FATCA portal.

Next steps After determining whether to register, VC and PE funds that are not deemed compliant should begin to implement FATCA. The first step for those not deemed compliant is to alter new account opening procedures so that Private Capital § Quarter 2 § 2014

new questions regarding possible U.S. status of new individual and entity clients are asked for new accounts opening on or after July 1, 2014. The IRS has released new forms – W-9, W-8 BEN and W-8 BEN-E – that include necessary FATCA certifications. Form W-8 BEN is now exclusive to non-U.S. individuals and Form W-8 BEN-E is now exclusive to non-U.S. corporations and trusts. The IRS has extended the date until which past W-8 forms are valid to the end of 2014. These new forms should both be embedded into new account opening procedures for FFIs that are required to do so for new accounts opened on or after July 1, 2014.

Proposed and temporary regulations under FATCA The IRS further provided FATCA guidance with the release of proposed and temporary regulations on February 20, 2014. This guidance does not change the July 1, 2014 effective date when FATCA becomes operational, but provided many helpful clarifications to the application of FATCA. For example, the definition of an “expanded affiliated group” was changed such that FFIs will no longer need to apply the complex indirect constructive ownership provisions. In addition, these regulations provide that a partnership or trust can elect to be a common parent of an expanded affiliated group. These regulations also introduced a new category referred to as a “Direct Reporting NFFE.” This new category allows passive NFFEs (foreign entities that are not financial institutions) to provide documentation on their substantial U.S. owners to the IRS directly rather than to their FFIs or withholding agents. A direct reporting NFFE is required to register with the IRS on the IRS FATCA portal, obtain a GIIN, and report its substantial U.S. owners. The IRS continues to publish guidance on FATCA and will continue to do so after FATCA’s July 1, 2014 start date. All FFIs will need to monitor future developments and be flexible to implement any new changes the IRS requires.

Dan Lundenberg is a partner at Grant Thornton LLP (Canada) and is the national leader of the U.S. Corporate Tax Services Group. Dan is also the Grant Thornton Canada leader for FATCA. He is based in Toronto and can be reached at 416-360-4988 or daniel.lundenberg@ca.gt.com.

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How to Fix Canada’s Immigrant Investor Program By Tim Kiladze, The Globe and Mail

ou can’t blame wealthy foreigners for their frustration. After years of finger crossing, hoping they would be granted entry into Canada, Ottawa pulled the rug out from under many would-be immigrants this February by cancelling a controversial program many hoped would expedite their journey. For nearly three decades, wealthy foreigners could invest in Canada to earn a special immigration status. Up until this year, individuals with a net worth of at least $1.6 million could ship $800,000 here in hope of coming over as an immigrant investor. Over 28 years, more than 130,000 people – when counting applicants and their families – entered the country this way. But in its latest budget Ottawa scrapped the initiative, known as the

Immigrant Investor Program, because the government worried too many foreigners were simply buying residency without ultimately living here or paying adequate taxes. Immediately after the decision, wealthy foreigners, many of whom reside in China, were dismayed. But three months later there is growing hope that their way into the country could be re-tooled in a manner that is more beneficial to Canada. Prominent private equity fund managers are some of the most vocal supports of such reforms. Rather than let foreigners loan money to Ottawa interest-free, they advocate requiring would-be immigrants to truly invest in Canada by funneling money into the country’s burgeoning venture capital industry. Although the proposal echoes the old program, given that wealthy

foreigners could still speed up their entry by putting their savings to work, private equity experts believe their suggestions would foster a very different system – one that would be better for broad economic growth. Under the old regime, foreigners didn’t exactly “invest” in Canada. Their funds often turned into fiveyear interest-free loans that provinces ultimately used to pad their annual spending plans. And because investors’ principal payments had to be returned, the foreign money came to be used to fund extremely safe projects, such as infrastructure builds, that the provinces already had planned. The bottom line: the money wasn’t put toward big, bold ideas. By forcing would-be immigrants to put their capital at-risk, and by letting Ottawa and the provinces invest the money in venture capital funds,

“ Originally the flexibility of the program was a good thing, but it eventually became untenable.” – Greg Smith, CEO, InstarAGF Asset Management Inc. 28

Private Capital § Quarter 2 § 2014

immigrant funds moving to Canada could ultimately help small start-ups grow into job-creating corporations. “The Immigrant Investor Program isn’t the solution for all of Canada’s business needs, but there’s definitely a role [to play],” said Greg Smith, chief executive officer of InstarAGF Asset Management Inc. and a former president of Canada’s Venture Capital & Private Equity Association. The private equity proposal isn’t all that far-fetched. In the early days of the Immigrant Investor Program, certain provinces, such as British Columbia and Saskatchewan, used the money to set up their own venture capital funds. Over time, however, the federal government let each province use the money in different ways, and the program ultimately morphed into the interest-free loans. “Originally the flexibility of the program was a good thing,” said Smith, “but it eventually became untenable.”

And while wealthy foreigners may be timid to invest in early stage companies, Dave Mullen, currently a managing director at Graycliff Partners and the former head of North American private equity for HSBC, said it’s possible to ensure small firms use the funds at many different stages of growth. Not only would that assuage the immigrants, it would also be beneficial to the companies. “You want to be able to fund a company through its lifecycle,” he said. “It’s a bit artificial to say we’re only going to do start-ups with this money.” If Ottawa wants some guidance on a revamp, it can look to Singapore as a case study. Historically, Singapore ran what was known as the Financial Investor Scheme, which allowed high net worth foreigners to gain permanent resident status by parking at least $10 million (Singapore) in the country, some of which could be used to buy real estate.

But in 2012 the government had a change of heart because the influx of money sent property prices soaring, and voters turned angry. Instead of scrapping the program, Singapore revamped it, turning the initiative into an investment vehicle somewhat similar to what Canada’s private equity players propose. Today potential investor immigrants to Singapore must put at least S$2.5 million into a new business entity or expand an existing business, or put at least the same amount in private equity funds that invest in Singapore-based companies. In some respects, Singapore is ahead of the curve. Around the world many countries still don’t seem to mind what their immigrant investor funds are put toward. In the U.K., for instance, the rules are rather lax and applicants can simply invest £1-million or more in government bonds – something critics argue does little to benefit the British economy.

VIACHESLAV NIKOLAENKO/SHUTTERSTOCK

Immigrant Investor Capital

Private Capital § Quarter 2 § 2014 29

Immigrant Investor Capital

“ You want to be able to fund a company through its life cycle.” – Dave Mullen, Managing Director, Graycliff Partners Canadians who used to work within the wide constraints of this old model understand why the government here wanted to change course. Colin Hansen, B.C.’s former finance minister, was never a fan of such a lax system. Although he was one of the early innovators who played a hand in setting up B.C.’s Renaissance venture capital fund, which used immigrant investor funds to kick-start private companies, he saw how the overall program deteriorated. “It’s probably time for a

different approach,” he said. When the program’s rules aren’t very strict, provinces are prone to start doing whatever they can to attract immigrant investor money. Ottawa used to dole the funds out based on which provinces the foreigners said they were likely to reside in, so the different regions tried to make themselves look the most attractive to would-be immigrants by lowering their investment standards.

CLAIRVEST KNOWLEDGE BASED. VALUE FOCUSED Founded in 1987, Clairvest is a Toronto based private equity management firm. Clairvest invests in successful mid market companies, principally in North America, across a wide array of industries. We invest our own capital along with our investment partners’ and our contribution is at least 25% of each investment. We approach each investment as owners and shareholders.

“It did, to a certain extent, become a race to the bottom as provinces tried to lower their thresholds,” said Hansen. Instead of re-tooling the investor program, Ottawa argues it has other, better initiatives on the go, such as the Startup Visa program, which offers permanent residency to entrepreneurs, as well as the Canadian Experience Class, which expedites residency applications for temporary foreign workers who are already living in Canada and for foreigners who graduated from Canadian universities and colleges. The private equity community, however, stresses the government has good reason to give them a listen. Over the past few years there have been calls for more support for Canadian venture capital because the sector’s funds have been drying up. Canada is also at a natural disadvantage when it comes to securing venture capital funds relative to behemoths like the United States because it has a shallow supply of capital. Because their proposals aren’t so off-the-wall, the private equity community is hopeful that their ideas will at least be heard, if not acted upon. Despite the current rhetoric coming out of Ottawa, “I do think the government is open to good ideas,” said Smith.

www.clairvest.com Tim Kiladze covers banking and capital markets for The Globe and Mail. Before joining the Globe, he worked on Bay Street in investment banking and fixed-income sales and trading.

Private Capital § Quarter 2 § 2014

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The Succession Conundrum PART 1 OF 2

Business leaders, the weak link to successors, and the companies who try to finance them By Jenifer Bartman, Jenifer Bartman Business Advisory Services

usiness succession planning is tricky – part old, part new, part money, part emotion – it’s no wonder that so many business leaders put it off. The reality is that an abundance of Canada’s small to medium- sized businesses (more than half, according to a survey conducted by the Canadian Federation of Independent Business) don’t have a succession plan at all. Since companies in this category are responsible for generating approximately one half of the Canadian economy, there is undoubtedly cause for concern. Consider some of the key survey findings1: ›› 51 per cent of business leaders surveyed indicated that they don’t have a business succession plan. Of the 49 per cent that have a plan, only nine per cent have a formal, written plan. ›› Approximately 48 per cent of business leaders plan to exit their company within the next five years. ›› 48 per cent plan to exit their business by selling to buyers unrelated to their family, while approximately 37 per cent plan to sell or transfer the business to family members. ›› The top barriers to succession planning include finding a buyer/suitable successor (56 per cent), valuing the business (54 per cent) and securing financing for the successor (48 per cent). Those who have even a moderate interest in the issue of business succession likely realize that various surveys and sources of information have yielded similar results. Delving beneath the surface, however, reveals interesting implications for business leaders, their potential successors and those who seek to finance the transition, some of which should be sufficient to kick-start those seeking an exit anytime soon into action.

The business leader perspective Since over 85 per cent of business leaders surveyed identified retirement as their reason for exit, it stands to reason that many have invested a considerable amount of time and effort into building their company. As a result, a transfer of ownership represents the primary opportunity to monetize value that has appreciated over what 32

Private Capital § Quarter 2 § 2014

could be a lengthy period of time. Although this increase might be significant as compared to that of inception, business leaders are often dissatisfied with the offers they receive, which reinforces the need for thorough, early and practical succession planning to maximize value wherever possible. What’s even more compelling is how dependent a business leader’s ability to cash out at what they consider to be an acceptable value actually is upon the ability to identify a potential successor who has the: (i) skills to lead the business; (ii) interest in doing so; and (iii) ability to secure financing. This is a tall order, since many successor candidates might only meet one or two of these requirements. Couple this with a lack of experience in terms of developing a business plan to take a company forward in a manner that provides the necessary level of comfort to secure enough financing to close the deal. In the absence of third party financing, business leaders are left with the gamble of whether or not the company, under new leadership, will be able to generate a sufficient amount of cash over time to pay what could be a significant portion of the proceeds related to the transfer of ownership, a scenario that doesn’t end well far too often.

The opportunity Business leaders and those in the financing field both have a vested interest in terms of how Canada’s succession planning future plays out; the former wants to cash out and the latter wants to roll cash back in. In order to avoid a time-consuming stalemate in a situation where time is of the essence, an opportunity exists to help potential successors become real successors by providing the tools to take companies forward; the right skills, plan and leadership ability (and a bit of extra effort to help get the deal past the goal line wouldn’t hurt!). Here’s how: ›› Business leader skills. Many potential successors have played a second tier role in their careers, without having had the opportunity to ascend to the CEO level. Since the top job can be quite different from what has been the experience thus far, potential successors

Succession Planning

Look for Part 2 of the Succession Conundrum in the Q3 2014 issue of Private Capital

are not only a powerful combination for success, this approach can also identify situations where an individual is not a good fit for a leadership role. Business leaders that do not encourage this type of development are effectively “boxing themselves in,” in terms of viable succession options. ›› Facilitating the exit. Financial partners can work with companies approaching (or well past) the need for succession by bringing options to the table, in terms of acquisitions, mergers, successor candidates and other types of transactions. In the case where financial partners identify “to do” items to improve a company or go-forward plan to the point where a succession transaction could be financed, facilitating the introduction to advisors who can help makes all the difference, as the complexities of the succession and financing processes make it difficult for business leaders and potential successors to identify the right advisory resources. The reality is that business leaders have to “help potential successors to help them”; the same is true for financial partners. In the absence of this approach, it might be difficult to affect a successful transfer of ownership in many cases. Seasoned business leaders know that a big part of their role is to create an environment that will make those around them successful; addressing the issue of succession really isn’t any different, in this regard. Where does this leave potential successors? This topic will be considered in the next installment of The Succession Conundrum.

Jenifer Bartman, CA, CMC is the founder & principal of Jenifer Bartman Business Advisory Services. An executive in the venture capital industry for over nine years, she now works with companies in transition, including those in the early, growth and succession stages of development. She has developed a succession-planning course that is sold nationally and speaks and advises on this topic.

Reference [1.] Passing on the Business to the Next Generation, Canadian Federation of Independent Business, 2012

XIXINXING/SHUTTERSTOCK

need a transfer of knowledge, mentoring and practice in abundance, prior to formally assuming the CEO role. Existing business leaders can help by creating professional development plans, delegating areas of responsibility in a meaningful way and taking the time to provide practical mentorship. Potential successors often complain that leaders don’t take the time to provide meaningful coaching; sadly, this is too often the case. Doing so can be the difference between a well prepared leader and one who stumbles out of the gate. ›› Investor ready business planning. Many potential successors don’t have experience with developing a business plan that is sufficient to secure financing, let alone the process of raising capital. Business leaders who have lost interest in the company, not stepped up internal planning and control processes, or haven’t had the need to seek financing for long periods of time don’t help the process, resulting in a lack of information and competitive positioning to develop a compelling business plan. Business leaders can make sound business planning a reality by ensuring that the right systems and information are in place within the company to support successors in putting together a plan that can be financed. Making the effort to critique existing business models, consider new markets and understand important industry developments can help to identify opportunities for the company well into the future, all of which bodes well with financial partners, and, in turn, benefits those who are seeking to exit. ›› Leadership ability. Those who have spent years at the helm of a company understand the importance of leadership skills, particularly in terms of the impact to the business as a whole. Being a good manager doesn’t ensure that a company will be well led, a reality that is too often overlooked when passing the torch. Recognizing the value of practical leadership development programs and forums and encouraging involvement can help to groom the business leaders of tomorrow. Starting well in advance and providing practical opportunities to put learning into practice

Private Capital § Quarter 2 § 2014 33

Do Not Underestimate the Impact of Crowdfunding By Gilles Duruflé

Private Capital § Quarter 2 § 2014

Crowdfunding

ince its beginning in 2006, and at every stage of its development since then, crowdfunding has been considered by mainstream industry leaders as a lunatic fringe incapable of having a real impact on their industry. These leaders have rapidly been proven wrong. As highlighted by the graph below1, it happened with the film, music and videogame industries and seems to presently be happening with product design and, more recently, technology. Many other verticals may well follow, even in sectors such as life sciences, where one would not expect it at first: “There are now a bunch of new platforms aimed at channeling capital from the crowd into startups in biotech (among other sectors): AngelList, Health Tech Hatch, Medstartr, Petridish, VentureHealth and Poliwogg to name a few, and dozens more are active across other non-biotech sectors. These range from broad social media driven investing platforms (like AngelList, of which we are investors at Atlas) to a broker-dealer model (Poliwogg)”2. As equity crowdfunding is on the starting blocks, the same scenario might unfold once again. Research firm Massolution estimates 100 per cent growth in equity crowdfunding in 2014, topping $400 million raised this year alone. OurCrowd’s analysis of the ten largest equity crowdfunding platforms (excluding those that invest in real estate) suggests $700M raised in 2014 is more realistic3.

Why is it growing so fast? There are strong drivers that support the development of crowdfunding and contribute to explain its rapid growth: ›› For creators: Lower cost of capital, wider and faster access to information from funders and potential users. Notably, pre-purchase and donation crowdfunding can play a very important role in financing and derisking early stage physical product companies; pre-sales are a “pretty good signal of market interest for the product.” ›› For funders: Access to investment opportunities, early access to new products, community participation, formalization of contracts and smaller investment sizes that make portfolio diversification easier. ›› For leading entrepreneurs/angel investors: The lead/ syndicate/backers model developed by AngelList (see below) is an awesome model that allows smart young managers who are well known to the entrepreneurial and VC communities and have their finger on the pulse of what is happening to get started, raise small funds and come into the system. Incentives for platforms may differ significantly according to their business model: the Kickstarter and Crowdcube’s revenue model is based on transaction value. It favours volume. AngelList’s model is based on firm performance (carried interest) and is more selective.

HELDER ALMEIDA/SHUTTERSTOCK

Governments increasingly see crowdfunding as an additional way of mobilizing capital for small business entrepreneurs.

Private Capital § Quarter 2 § 2014 35

Crowdfunding There are also significant disincentives and risks: ›› For creators: Extensive disclosure obligations, costs of managing a large group of investors. ›› For funders: Project risks difficult to mitigate with an adequate due diligence process, creator incompetence (unable to deliver) or outright fraud.

The market innovates to mitigate the new types of risks generated by crowdfunding The above-mentioned risks, especially creator incompetence or fraud, are often mentioned as reasons why crowdfunding and especially equity crowdfunding will generate deceit and remain marginal. This position may underestimate the market’s ability to find new ways to mitigate these risks. Two examples: ›› To mitigate the risk of creators being unable to manufacture and deliver products they designed and advertised, Kickstarter has added a series of guidelines for new hardware and product design. Furthermore, Dragon Innovation, a new crowdfunding platform launched by hardware design and manufacturing veterans, has entered the game. Dragon takes on detailed vetting of each team and project, so that if the funding threshold is met, the team will deliver on the promise to its backers. This step ensures that real people with real products are behind each project. ›› To mitigate project risks and lack of access to an adequate due diligence process, AngelList has developed the lead/syndicate/backers model, whereby experienced lead investors can form syndicates of backers to co-invest with them, leveraging both their off-line relationship with start-ups and online reach to a larger group of investors. Let us also recall that Assob in Australia and Funding Circle in the UK have been functioning for several years without generating massive fraud or deceit. This does not mean that it will not happen. But the ability of the market and regulators to respond should not be underestimated.

Another interesting dimension of crowdfunding is that it could fund not only more, but different innovation Since it brings to the table different information (the “wisdom of crowds”), preferences (not only risk adjusted returns, but participation and fun) and rules (smaller investments, providing frameworks for friends and family), crowdfunding does not perfectly correlate with other sources of investment, neither by sub sector nor by geography. It may fund different projects differently, thus enlarging the potential deal flow. This could also offer more possibilities to peripheral regions. Crowdfunding is a way of bringing in money from outside the traditional hubs as it connects local entrepreneurs and local business angels or lead investors to outside investors, linking local people to global platforms.

Finally, governments can use crowdfunding as a tool to support the financing of SMEs Governments increasingly see crowdfunding as an additional way of mobilizing capital for small business entrepreneurs. When the UK government established a £100-million co-investment fund for small business loans, it launched an RFP. Two peer-to-peer lending crowdfunding platforms focused on SMEs, including Funding Circle, were selected and have proven to be effective toward increasing the range of options available for SME financing. Local councils and universities also contribute to Funding Circle. Government support has had a significant impact as it has boosted the visibility and credibility of these platforms. While this entails risk for the government, default rates have remained low so far.

Dr. Gilles Duruflé is an independent consultant advising venture capital and private equity funds, institutional investors and governments. He is also executive and vice president of the Quebec City Conference and president of its Public Policy forum on Venture Capital and Innovation. He is a vice president of CVCA – Canada’s Venture Capital and Private Equity Association.

Endnotes [1.] This article is notably based on the presentation made by Professor Ajay Agrawal at the 2013 Public Policy Forum on Venture Capital and Innovation (“PPF”) and the panel that followed. Detailed documentation on this Forum and its main conclusions can be found at: www.quebeccityconference.com/en/archives.php. For an in-depth analysis of the economic drivers of crowdfunding, see: Ajay K. Agrawal, Christian Catalini, Avi Goldfarb, Some Simple Economics of Crowdfunding, NBER Working Paper 19133, June 201 [2.] Source : Ajay Agrawal “Some simple economics of crowdfunding”, PPF, Quebec City Conference December 3, 2013 [3.] Bruce Booth (Partner at Atlas Ventures), Forbes, 4/09/2014 @ 7:16AM, www.forbes.com/sites/brucebooth/2014/04/09/pushing-forward-with-collaborative-rd-models-in-biotech-roche-spero-and-biogen-ataxion [4.] Source: Zack Miller, Forbes, 4/10/2014 @ 6:45AM www.forbes.com/sites/zackmiller/2014/04/10/barbara-corcorans-5-tips-for-investing-in-crowdfunded-startups

Private Capital § Quarter 2 § 2014

Top 25 Canadian Venture Capital Deals in 2013 Company 1. HootSuite Media Inc. 2. Shopify Inc. 3. Enerkem 4. Anaergia Inc. 5. Sulvaris Inc. 6. Plasco Energy Grup In. 7. Trimel Pharmaceuticals Corporation 8. Celator Pharmaceuticals Inc. 9. Enerkem Alberta Biofuels LP 10. Potentia Solar Inc. 11. Steel Reef Infrastructure 12. BTI Systems Inc. 13. Real Matters Inc. 14. Beyond the Rack Enterprises Inc. 15. Clementia Pharmaceuticals Inc. 16. Replicon Inc. 17. Xagenic Inc. 18. Kik Interactive Inc. 19. Boreal Genomics inc. 20. Aquinox Pharmaceuticals Inc. 21. AppNeta Inc. 22. Wishabi Inc. 23. MSI Methylation Sciences Inc. 24. Visier Inc. 25. Thalmic Labs inc.

Top Deals in 2013

Location $ (in millions) BC 171.25 Ontario 105.3 Quebec 50 Ontario 47.5 Alberta 42.5 Ontario 40.98 Ontario 40 BC/New Jersey 39.56 Alberta 37 Ontario 33.81 Alberta 33.15 Ontario/Mass. 28.74 Ontario 27.54 Quebec 25 Quebec 22.5 Alberta/California 21 Ontario 20 Ontario 19.51 BC 18.56 BC 18.49 BC/Mass 16.44 Ontario 15.74 BC 15.60 BC 15.28 Ontario 14.50

SOURCE: CVCA WITH INPUT FROM THOMSON REUTERS

PRESSMASTER/SHUTTERSTOCK

Top 25 Canadian Domestic Private Equity Deals in 2013 Company* 1. CML HealthCare Inc. 2. BlackBerry Limited 3. Softchoice Corporation 4. Encana Jean Marie Natural Gas Assets (Endurance Energy Ltd) 5. KANATA Energy Group Ltd. 6. Pengrowth’s SE Saskatchewan Assets (TORC Oil and Gas) 7. Pengrowth’s Weyburn Assets 8. Saguaro Resources Ltd. 9. Seven Generations Energy Ltd. 10. Torq Energy Logistics Ltd. 11. Apache’s Wester Canada Assets (Ember Resources Inc.) 12. EACOM Timber Corporation 13. Western Wind Energy Corp. 14. TORC Oil & Gas Ltd. 15. Black Swan Energy Ltd. 16. Cequence Energy Ltd. 17. Bonnett’s Energy Corp 18. MCAP Commercial LP 19. New Fuel Systems Inc. 20. C International Income Fund 21. Regional Tire Holdings Inc. 22. Barrick Gold Certain Energy Assets (Venturion Oil Ltd.) 23. La Coop fédérée 24. Empire Theatres Western Canadian, Select Ontario Cinemas (Landmark Cinemas) 25. Specialized Tech Inc.

Top 25 Canadian Private Equity Deals in Foreign Companies in 2013 Location Ontario Ontario Ontario

$ (in millions) 1,220 1046.8 412

BC Alberta

397 330

Saskatchewan Saskatchewan Alberta Alberta Alberta

316 316 315 251 250

Alberta Quebec BC Alberta Alberta Alberta Alberta Ontario BC Ontario Ontario

220 218 190 170 150 120 115 105.7 100 87.06 62.5

Alberta Quebec

60.69 55

Alberta Alberta

53.3 51.55

Company 1. Neiman Marcus Group LTD inc. 2. Fortum Distribution Finland 3. Saks Incorporated 4. NET4GAS, s.r.o. 5. HOCHTIEF AirPort GmbH 6. SeaCube Container Leasing Ltd. 7. CPG International 8. Vue Entertainment 9. Industrial Developments International Inc. 10. Port of Brisbane Pty Ltd. 11. Emerald Expositions, Inc. 12. Mission West Silicon Valley Properties 13. Civica plc 14. Nextgen Group Holdings Pty Ltd 15. Burton’s Biscuit Company 16. Arteris S.A. 17. Aliansce Shopping Centers S.A. 18. Bullring Shopping Centre 19. ORPEA Group 20. Caliber Collision Centers 21. SEGRO European Logistics Partnerships (SELP) 22. Gazeley Limited 23. Busy Bees Nursery Group 24. American Safety Insurance Holdings Ltd. 25. Shea Homes, Inc.

$ (in millions) 6,247.8 3,723.51 3,020.64 2,187.2 2,085.9 1,848.6 1,548.6 1,460 1,140.92 967 965.68 819.47 606.72 603 588.04 509.11 493.68 482.08 468.37 444.34 426.62 377.03 368 327.41 69.51

SOURCE: CVCA

*PLATFORM COMPANY IN BRACKET SOURCE: CVCA WITH INPUT FROM THOMSON REUTERS

Private Capital § Quarter 2 § 2014 37

YOU NEED CVCA. CVCA NEEDS YOU. CVCA’s mission is to promote the development of the venture capital and private equity industry. CVCA pursues this mission through active advocacy and development activities, such as:

ADD

Promoting sound public policy, including on tax, trade and securities issues to federal and provincial governments and regulatory bodies to bring about a strong, effective and internationally competitive venture capital and private equity industry. Facilitating information exchange, communication and association among all persons engaged in the investment of risk capital in Canada through periodic networking and social events.

YOUR

VOICE TODAY JOIN CVCA

Private Capital § Quarter 2 § 2014

Providing a forum for the professional development of its members and those interested in the venture capital and private equity industry through regular educational events.

Encouraging Canadian and foreign institutional investors, including corporate and public pension funds and insurance companies, to allocate a portion of their monies under management to Canadian venture and private equity capital investment.

Encouraging individuals, including angel investors, to invest in, and provide advice to, early stage Canadian growth companies.

Enhancing ties with leading venture capital/private equity associations around the world, particularly in the U.S., Europe, Australia and Israel.

About CVCA CVCA was founded in 1974 and is the association that represents Canada’s venture capital and private equity industry. Its members are private equity and venture capital firms and other organizations that manage pools of risk capital designated for investment in venture capital, buyouts and mezzanine funding and other forms of private equity in Canada. With over 2,000 members, CVCA represents the majority of Canadian organizations who are active in venture capital and other forms of private equity invested in Canada-based companies. CVCA’s members manage over $105 billion.

Benefits The principal benefit of belonging to CVCA comes from adding your voice to setting the agenda for the only organization in Canada solely dedicated to pursuing growth opportunities for the Venture Capital and Private Equity industry as a whole. As a highly regarded, professional organization, CVCA includes the large majority of industry participants – private and public sector firms as well as professional advisors. CVCA’s members actively collaborate to increase the flow of capital into the industry and expand the range of profitable investment opportunities. This is accomplished by CVCA undertaking a wide variety of initiatives, ranging from developing comprehensive and accurate performance and valuation statistics to promoting the industry’s interests with governments and regulatory agencies.

For pricing information and membership application forms, visit www.cvca.ca/membership

Specific benefits include ›› Government influences and access ›› Networking ›› Events ›› Publications and research reports ›› Recognition ›› Array of services and programs

Membership types Full Member – Canadian organizations with risk capital funds under management Partners – Service providers and advisors International investor members Industry affiliates

index to advertisers Institute of Corporate Directors . . . . . . . . . . . . . . . . . . . . . . 1

Argosy Partners . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 20

KERN Partners . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 21

AVAC Ltd. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 20

Lumira Capital Corp. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 21

BeauVest Canada Inc. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 20

Minden Gross LLP . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 21

Bioenterprise Capital Ventures Inc. . . . . . . . . . . . . . . . . . . 20

MNP Corporate Finance . . . . . . . . . . . . . . . . . . . . . . . Cover 4

Blaney McMurtry LLP . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 20

Mosaic Capital Corporation . . . . . . . . . . . . . . . . . . . . . . . . 21

BMO Capital Corporation . . . . . . . . . . . . . . . . . . . . . . . . . . 20

Northleaf Capital Partners . . . . . . . . . . . . . . . . . . . . . . . . . 21

Bond Capital . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 20

ONCAP Management Partners L.P. . . . . . . . . . . . . . . . . . . 21

Canadian Institute of Chartered Business Valuators (CICBV) . . . . . . . . . . . . . . . . . . . . . . . . . . 3

PFM Capital . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 21, 31

Choate, Hall & Stewart LLP . . . . . . . . . . . . . . . . . . . . . . . . 20

Rho Canada Ventures . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 21

Clairvest Group Inc . . . . . . . . . . . . . . . . . . . . . . . . . . . . 20, 30

Rogers Venture Partners . . . . . . . . . . . . . . . . . . . . . . . . . . . 21

Davies Ward Phillips & Vineberg LLP . . . . . . . . . . . . . . . . . 20

Stable Capital Advisors . . . . . . . . . . . . . . . . . . . . . . . . . . . . 21

Dentons Canada LLP . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 20

Stikeman Elliott LLP . . . . . . . . . . . . . . . . . . . . . . . . . . Cover 2

EnerTech Capital . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Cover 3

Tandem Expansion . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 21

FountainVest Partners (Asia) Limited . . . . . . . . . . . . . . . . . 20

TELUS Ventures . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 17, 21

Georgian Partners . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 20

TorQuest Partners . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 21

The Globe and Mail . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 27

Torys . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 21

Gowlings Lafleur Henderson LLP . . . . . . . . . . . . . . . . . . . . 20

TSX Shorcan Brokers . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4

iGan Partners . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 20

Windsor Private Capital . . . . . . . . . . . . . . . . . . . . . . . . . . . 21

innovacorp . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 20

Yaletown Venture Partners . . . . . . . . . . . . . . . . . . . . . . . . . 21

SERGEY NIVENS/SHUTTERSTOCK

AIP Private Capital . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 20

Private Capital § Quarter 2 § 2014

RBC Royal Bank . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 21

 

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Our services include: Our Our Our services services services include: include: include: Our services include: Our Our Our services services services include: include: include: • Divestitures • • Divestitures • Divestitures Divestitures • Divestitures Our Our services services include: include: Divestitures •• Divestitures Divestitures • Financing •• •• Financing Financing Financing • Financing •• • Divestitures •• Financing Divestitures Financing Financing • Acquisitions • •Acquisitions • Acquisitions Acquisitions • Acquisitions •• • Financing •• Acquisitions Financing Acquisitions Acquisitions • Due Diligence • • Due • Due Due Diligence Diligence Diligence • Due Diligence •• • Acquisitions •• Due Acquisitions Due Due Diligence Diligence Diligence • of Due • Ted Due Diligence Diligence Contact Ted McCarron, President Contact Contact Contact MNP Ted Corporate McCarron, Ted McCarron, McCarron, President President President of of MNP of MNP MNP Corporate Corporate Corporate Contact Ted McCarron Contact Contact Contact Ted Ted McCarron, Ted McCarron, McCarron, President President President ofof MNP of MNP MNP Corporate Corporate Corporate Finance at 1.877.500.0792 Finance Finance Finance at at 1.877.500.0792 at 1.877.500.0792 1.877.500.0792 Finance at 1.877.500.0 Contact Contact Ted McCarron, Ted McCarron, President President of MNP of MNP Corporate Corporate Finance Finance Finance at at 1.877.500.0792 at 1.877.500.0792 1.877.500.0792 Finance Finance at 1.877.500.0792 at 1.877.500.0792