Opinion: Canada took itself to market before it was ready

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The data room gets you the cheque. Canada booked the meeting before the data room was ready. Photo by Peter J Thompson/PostmediaPart of my job as an adviser who prepares businesses for sale is writing the kind of document Ottawa just showed the world. When a business owner raises capital or sells, we build the pitch book: the pitch itself, complete financial statements and a projection. The first job is a sanity check on the numbers, because the books a business runs on are rarely the books a buyer can trust.THIS CONTENT IS RESERVED FOR SUBSCRIBERS ONLYSubscribe now to read the latest news in your city and across Canada.Exclusive articles from Barbara Shecter, Joe O'Connor, Gabriel Friedman, and others.Daily content from Financial Times, the world's leading global business publication.Unlimited online access to read articles from Financial Post, National Post and 15 news sites across Canada with one account.National Post ePaper, an electronic replica of the print edition to view on any device, share and comment on.Daily puzzles, including the New York Times Crossword.SUBSCRIBE TO UNLOCK MORE ARTICLESSubscribe now to read the latest news in your city and across Canada.Exclusive articles from Barbara Shecter, Joe O'Connor, Gabriel Friedman and others.Daily content from Financial Times, the world's leading global business publication.Unlimited online access to read articles from Financial Post, National Post and 15 news sites across Canada with one account.National Post ePaper, an electronic replica of the print edition to view on any device, share and comment on.Daily puzzles, including the New York Times Crossword.REGISTER / SIGN IN TO UNLOCK MORE ARTICLESCreate an account or sign in to continue with your reading experience.Access articles from across Canada with one account.Share your thoughts and join the conversation in the comments.Enjoy additional articles per month.Get email updates from your favourite authors.THIS ARTICLE IS FREE TO READ REGISTER TO UNLOCK.Create an account or sign in to continue with your reading experience.Access articles from across Canada with one accountShare your thoughts and join the conversation in the commentsEnjoy additional articles per monthGet email updates from your favourite authorsSign In or Create an AccountSo when the 66-page prospectus behind this week’s investment summit began circulating, I read it the way every fund manager in that room in Toronto likely read it. Like a buyer. And in my opinion, what a buyer saw is a good concept that went to market too early.Get the latest headlines, breaking news and columns.By signing up you consent to receive the above newsletter from Postmedia Network Inc.A welcome email is on its way. If you don't see it, please check your junk folder.The next issue of Top Stories will soon be in your inbox.We encountered an issue signing you up. Please try againThe evidence is in the book itself. It contains 167 projects. Some are “fully permitted and shovel-ready.” Others list their current stage as “pre-application,” and one is simply at concept. The disclaimer up front says project information was submitted directly by the proponents and included substantially in the form provided, and that inclusion should not be taken as an endorsement. In plain English: nobody checked the numbers of the 167 sellers inside. Buyers hunt for the weakest page in any pitch book, because the weakest page tells them how much of the rest to believe. In due diligence, one inaccurate number puts the entire financial statement into question, and the discount that follows is rarely negotiable.I have no issue with the summit itself. Bringing the world’s largest investors to Toronto beats sitting on our hands hoping somebody notices us. My issue is that we showed up with an incomplete book. So here is the question I would ask any client who brought me this document: what, exactly, would even two more months have cost you?Nothing about the opportunities was going anywhere: the projects were not going to expire, global capital was not about to stop looking for a home, and I have yet to meet a fund manager who would have priced Canada differently in November than in September. The honest case for doing it now is political. A trade war is raging, a budget is coming and the federal government needs to show momentum. But those are political reasons and this is a financial process.I have spent my career watching what happens to sellers who try to move forward with a sale unprepared. A client that made products for the oil and gas industry went to market and got lowballed, offered 25-50 per cent of their asking price. Due diligence turned up receivables more than three years old, shareholder loans and prepaid expenses that did not reconcile, and balance sheet items the owner could not explain. Every unexplained number widened the discount. We spent two months cleaning up the balance sheet and building a forecast a buyer could believe in. The client went back to market and received the offer they had been expecting. The entire exercise took the same two months I am asking Ottawa about.This advertisement has not loaded yet.This advertisement has not loaded yet, but your article continues below.The rush itself gets priced, too. Buyers read a rushed seller as a desperate seller. At the very least, it results in a discount. In the worst case, investors decide not to take any interest at all.A country is not a company, and governments can de-risk projects in ways no private seller can. But a curated book, with a sanity check on the numbers and the earlier projects labelled honestly as a pipeline with a credible projection, was just two months of work — less if you have the resources of the federal government at your disposal. Every seller I have ever advised would tell you that watertight preparation is the cheapest money they ever spent.The pitch book gets you the meeting. The data room gets you the cheque. Canada booked the meeting before the data room was ready.Daryl Ching is the founder of Vistance Accounting. We apologize, but this video has failed to load.Notice for the Postmedia NetworkThis website uses cookies to personalize your content (including ads), and allows us to analyze our traffic. Read more about cookies here. 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