ESOP Builders Inc. - Newsletter

Anyone who has traveled the London Underground will have heard the announcement at each stop - "Mind the Gap". The gap in question, of course, is the space between the platform and the subway car. Only a few inches, but a very important few inches if one misjudges them.

CIBC uses this analogy when referring to the business of buying and selling companies in that there is almost always a gap between the vendor's expectations and what the buyer is willing to pay.

The gap gets wider in volatile times such as the economic ones in which we found ourselves in the past year. There was considerable uncertainty about critical factors such as future cash flows and available bank financing, says a CIBC spokesman.

Invariably, the vendor has a much higher degree of comfort about the future than the potential buyer. The vendor has probably lived through a number of business cycles and managed to emerge each time. They also have an emotional attachment to the business and, consequently, often place a higher value on it that the buyer can justify.

Sometimes that value gap can be bridged through negotiation, says CIBC. At other times instruments such as contingent vendor take-back debt or earn-out structures can be employed, under which the vendor is paid more if things work out better than the buyer anticipated.

In times like these, creative solutions are called for in order to close the gap and complete the buy/sell transaction to the satisfaction of both parties.

One principle remains constant throughout, regardless of how wide or narrow the gap. That is that both the vendor and the buyer will have a better outcome when professionals are engaged to assist and provide advice in managing the gap. Mid-market investment professionals can provide assistance and advice on both the buy and sell side of transactions.

The good news is there are signs of recovery in the mid-market investment banking sector. Buyers are returning with capital to spend, according to latest figures from CIBC.

According to Canada's Venture Capital and Private Equity Association, more than $20 billion has been raised in the past three to four years and Canadians funds still have a considerable available capital to deploy with many of these funds seeking investment in mid-market size companies.

-- From CIBC Mid-market Investment Banking Report - Trevor Gough, Managing Director - trevor.gough@cibc.com

CANADIANS MORE UPBEAT

In a related theme, The Economic Club of Canada recently conducted a poll that revealed that Canadians surveyed were more optimistic about 2010 than they were about 2009.

The survey conducted by Toronto's Pollara Strategic Research, indicated that 54% of 4,263 respondents believed Canada's economy would grow during the year.

That contrasted to 20% just one year earlier who thought 2009 would see Canada realize some economic gains.

The poll also found that 17% of people surveyed believed Canada was entering a period of modest economic growth. That level was almost three times as many as the percentage of Canadians who felt that way in 2009.

Meanwhile, the Bank if of Canada said Canadian companies are feeling more confident.

The central bank's survey in January said a survey of business conditions were generally favourable across the board.

Highlights include:

THIS EMPLOYEE-OWNED TREE COMPANY BEARS FRUIT

With a name like Lance Green you just know this guy has to love trees.

Green is one of the employees of the Davey Tree Expert Company, an ESOP-based organization, with its head office in Kent, Ohio but with successful locations in five Canadian provinces and 45 states.

Davey Tree Expert Co. was sold by its founding family to its employees in 1979. Since then, the company has encompassed 7,000 employees and has seen revenue grow from $60 million in 1979 to $600 million in 2008. That's 30-plus years of successful employee ownership.

Throughout Davey's North American operations, each employee-owner has a real stake in the company and is committed to delivering their best every day, regardless of location or position. Foreman Lance Green is no exception.

Green, one of Davey's employee-owners is a landscape foreman for Commercial Grounds Maintenance operations in Northeastern Ohio. He joined Davey in 2005 and manages on-site operations and trains crews in proper techniques - often leading by example.

Green appreciates the diversity in day-to-day tasks and the resources available to each employee owner. He says he is happy with the value Davey places on individual expertise.

"People are knowledgeable in different areas," says Green, who enjoys gardening and hiking. "Davey takes that knowledge and combines and disperses that throughout the company. At my branch, we consistently look and learn from each other."

Closer to home in Mississauga, Ont., Scott Ineson followed in his brother's foot steps and began a career with Davey more than a decade ago.

"With Davey, there are so many options to explore many different fields in the company. Plus, there's always room for advancement, and you have the great benefit of employee ownership."

After developing an interest in climbing and tree care, Ineson became a foreman for residential operations in Mississauga. He joined Davey in 1999 and says he enjoys the opportunities for career advancement and the multitude of unique experiences with his coworkers.

Among them was the sponsorship of a 400-year-old oak in the Bronte Creek Provincial Park in Oakville, Ont. Ineson was part of a Davey crew that pruned and fertilized the historic tree.

"Davey is building for the future," Ineson says. "The company strives to continually be a better company," added Ineson.

In the Kitchener, Ont. office of Davey, Adam Murray welcomes the challenges he often faces with his job and has the patience and discipline needed to tackle them. After all, he was in the Canadian Army and worked as an armored car guard for several years before joining the tree experts in 2002.

A Residential/Commercial foreman, Murray had to apply his skills when he responded to a storm damage call at a home during the summer of 2007. A tree had blown down on a house, but the location of the tree and property limited the equipment that could be used.

"Earlier, I had recommended that the tree be removed," says Murray, an ISA Certified Arborist and an Ontario Ministry of Training and Colleges Certified Utility Arborist. "But the homeowner wanted to salvage it and just have it pruned. When we showed up again on his property, we were committed to making sure nothing would be damaged. It was a make-it-or-break-it situation, and we worked our hardest - in the dark and into the night, even - to get it off his house."

When the job was successfully completed, neighbours cheered, and the homeowner breathed a sigh of relief as barely a scratch was left on the home. Murray believes that everyone's personal skills and knowledge contributed to the positive outcome - and to all victories each Davey crew encounters.

Where the trees grow tall out on Canada's west coast, Darcy Soderstrom is a general foreman at Davey working with the Vancouver Island Electric account in Nanaimo, B.C. He joined the tree experts in 1993 as a groundsman and lawn mower for residential operations in Calgary. He now works day in and day out in developing, planning, and delivering services on time and within budget in Nanaimo for the hydro.

He takes pride in providing a team-based work environment where quality of work is encouraged and recognized. "In my time working here, I've hired and trained several employees who are now working as excellent foremen throughout our western Canada operations," Soderstrom says.

Karl Warnke, chief executive officer of the Davey Tree Expert Co., says the key to sustaining a successful employee-owner environment is a fundamental belief "that people are your greatest asset."

"If you are truly going to turn your company over to employees and expect employees to collectively run an organization profitably and sustain it for many, many years, you have got to have absolute faith and confidence that people can do that."

Thirty years of employee-ownership prove that theory is in practice at Davey Tree Expert Company.

2010 EMPLOYEE OWNERSHIP CONFERENCE

The 2010 Employee Ownership Conference will host business leaders and innovators from across North America to Minneapolis, Minnesota from April 19-22.

More than 700 business leaders and employee ownership and equity professionals will gather at the Hilton Hotel in downtown Minneapolis for the annual, presented by the National Center for Employee Ownership (NCEO) and the Beyster Institute at the University of California.

Perry Phillips and his team of experts at the Toronto area based company, ESOP Builders Inc., is proud to be one of the sponsors of this conference.

Highlights of this year's conference include:

To register for this conference, either call the NCEO at 510-208-1304, or register online at http://www.nceo.org/pages/acreg.php.

NEW PRODUCTS LAUNCHING SOON

Updated ESOP Book

The new book ESOPs in Canada will have a publication date of early 2010. It will include new selections on Taxes, Financing, Human Resources, ESOP Culture, Leadership Succession, ESOP Design Strategies and Case Studies.

Ownership Thinking TM

A program which teaches employees how to act as owners. Based on the Ownership Thinking TM Program used successfully in the United States on over 800 companies. Metric based to allow ROI calculations on company financial value drivers.

ESOP Administration Software Program

This program will allow ESOP companies to outsource their ESOP administration to a web based system operated by ESOP Builders.

ESOP Culture Consciousness

A program to enhance the ESOP Culture of the Company by utilizing the ESOP team committee post implementation. Metric based to allow ROI calculations on company ESOP goals.

ESOP EXEC Financing Plan

Financing program to allow executives to purchase significant shares from owners to facilitate owner transition in a tax effective manner and at a lost capital cost basis.

NOTABLE QUOTABLES

"How far you go in life depends on your being tender with the young, compassionate with the aged, sympathetic with the striving, and tolerant of the weak and strong. Because someday, in your life, you will have been all of these."
-- George Washington Carver

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