NEWS

Wilson also promised several dishes for future sampling:

·A corporate income tax discussion paper (to consider the idea of fewer tax incentives and lower tax rates).

·A corporate loss transfer system discus-sion paper for related companies.

·A review of the unemployment insurance program.

The Wilson diet is a strong prescription for the deficit that will grow even stronger over the next five years. One of this bud-get's most innovative proposals is to sche-dule future budgets between mid-January and mid-February (a regular annual check-up, so to speak). The advantages of this are so obvious — providing greater certainty for planning and decision making by gov-ernments and the private sector (with less gamesmanship by the incumbent govern-ment) — that one wonders why it hasn't been done before.

Lower income tax bracket indexing and higher taxes on alcohol, tobacco and sales mean that taxpayers earning less than $40,000 a year will pay $350 to $500 more in taxes by 1986. Those earning more than $40,000 will pay a temporary surtax of 5%, while taxpayers earning more than $60,000 will pay 10% for an 18-month period, start-ing July 1, 1985.

A temporary surtax of 5% on 60000

large corporations will also begin July 1, 1985 and continue for one year (some 205,000 small business corporations re-main exempt). Starting January 1, 1986, a temporary capital tax on larger financial institutions falls into place for two years. This tax will be equal to an annual rate of 1% of capital employed in Canada in excess of a $200 million threshold.

For many Canadians, the budget may seem to be upside down. They would say the current unemployment rate calls for even greater government spending — not less. According to them, high interest and unemployment rates can be attributed to greedy, shortsighted capitalists. For oth-ers, this is the first decent budget in liv-ing memory. Entrepreneurial capitalists should be particularly pleased, since the financial minister obviously had them in mind when he said his budget "challenges Canadians by rewarding success, not subsi-dizing effort!'

Although the cocktail party was typi-cally superficial, and the appetizer was merely intriguing, I think Wilson's main course will offer the Canadian economy a badly needed dose of vitamins.

JAMES D. VASOFF, PENG, MBA, MA WALWYN STODGELL COCHRAN MURRAY TORONTO, ONTARIO

Ottawa report

Tax advisory council announced

Minister of National Revenue Perrin Beatty recently announced the formation of an advisory council on tax administration. William Lawlor, CA, a well-known tax practitioner with Ernst & Whinney, ha!, been appointed vice chairman along with Deputy Minister Harry Rogers.

The council's 21 members, tax practi-tioners and other individuals experienced in small business, civil liberties, consume:. issues, academic research and income tax practice, are to advise the minister on the private sector's needs and expectations as well as offer guidance on issues such as the underground economy and the simplifica-tion of tax forms, guides and bulletins. The minister said he expected members would meet approximately twice a year, partici-pating on a voluntary basis.

Chartered accountants serving on the committee are Serge Chevalier of Ray-mond, Chabot, Martin, Pare & Associes, Montreal; Robert J. Dart of Price Water-house, Toronto; James M. Gilchrist, taxa-tion director of Suncor Inc., Toronto; Lee H. Hergott, of Hergott Duval, Stack and Partners, Saskatoon; and Dennis Zinger of Montgomery, Zinger, Martin in Elora. Ontario.

in print

Milton H. Barbarosh and T.W. Marlow, The Acquisition Decision. Hamilton, Ontario: The Society of Management Accountants of Canada (in conjunction with the National Association of Accountants, Montvale, N.J.), P.O. Box 176, MPO L8N 3C3. 102 pp. $15. Conducted by a Woods Gordon research team, this report presents the findings of a Canada/US corporate acquisitions study of company executives involved in success-ful acquisitions. The report examines how management accounting systems can be made to conform with the actual decision processes and managerial requirements for accounting information, and includes a chapter on the various stages of an acquisi-tion — covering everything from the search for a candidate to hostile takeovers and un-solicited offers. A bibliography is included.

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2 0 CAMAGAZINE

Juts,liulltet 1985

Depart ments/Rubriques

Editorial 3 Stanactrabearer supreme

Editorial 4 Le Porte-drapeau par excellence

Letters 5 News 6 People: Standcarcts. General: Economic outlook: Ottawa report. In print

Research 54 What's going on Edited by Douglas Thomas. FCA

Recherche 56 Foisons le point. Redacteur. P, Douglas Thomas. EC:A

Verification 59 L'intearalite. une assertion diffiCile o verifier. Reclacteur: Donald J. Cockburn, F_C_A.

Auditing 61 Tackling the completeness assertion. Edited by Donald J_ Cockburn. FCA.

Taxation 64 Canodo-US lax treaty a drain on resources. By J. Michael Lavery. CA. and Peter Rudin. MBA. CA_

Fiscalite 66 Lo convention fiscale Cohoda.ttats-Unis et les ressources. Par J. Michael Lavery. C.A., et Peter Rudin, MBA, C.A.

In practice 70 Draft for a brave new world. By Keith S. Vance. CA

Education 73 Are there predictors of success on the UFE? By Eldon Ferguson. FCA, and Tom McCalden. MBA. CA.

Formation des etudiants 78 L'E.E.U.: existerait-il des indicdleurs de chances de succes-) Por Eldon Ferguson. F.C.A., et Tom McCalden. MBA, C.A.

Classified 84 Professional directory 87

HIGH-RATIO ASSET-BASED FINANCING IN LEVERAGED BUYOUTS

Smart buyers have been using leveraged buyouts for decodes. but a high-ratio asset-based loon makes financing one a whole lot easier.

Milton H. Barbarosh, MBA, MCABV, CA, and Victor Tong, MBA, CGA

24

INTEREST RATE SWAPS: MATCHES ARRANGED FOR MUTUAL GAIN

An important new tool for managing interest rate risks in today's capital markets, swaps can be used to hedge floating exposures, manage

costs, leverage borrowing advantages or lock in desired rates. Gilbert M. Fick, MBA, CA, and Grant E. Sardachuk, MBA

36 NEW ACT PROPOSED TO RESTRUCTURE FIRA

The Progressive Conservative government's desire to attract foreign investment to Canada represents a major departure from the previous

Liberal government's position. Douglas C. New, LLB, and Richard C. Rohde, RIA, CGA, CA

42 POPULAR APPROACHES TO ACCOUNTING FOR

PENSION COSTS AND LIABILITIES in a recent survey, Canadian corporate officers, public accountants

and academics stated their preferences. Daniel McMahon, CA

46 Le Supplement fiancais est insere entre les pages 44 et 45 de tous les exemploires de CA

magazine distribues oux abonnes du Quebec et oux outres obonnes du Supplement trancais.

FINANCEMENT SPECULATIF ET NANTISSEMENT DES ACTIFS Des acheteurs ostucieux miseni sur ieffel de levier depuis plusieurs decennies. mais les prets sur nantissement des actifs focilitent de beoucoup le finoncement. Milton H. Barbarosh, MBA, MCABV, C.A., et Victor Tong, MBA, CGA

30

CA C 2

For Pour le Professional comptable Accountants professionnel & Financial et le directeur Managers financier

HIGH-RATIO ASSET-BASED FINANCING

IN LEVERAGED BUYOUTS

THE CONCEPT OF LEVERAGED BUY-Outs — of using a high degree of lever-age to purchase the assets or shares of a business whose forecasted cash flows ap-pear to be enough to pay off the corres-ponding acquisition debt — has been around since the rurn of the-century.

Although it was widely regarded in the early 1900s as an unethical way of doing business, smart buyers have been using leverage for decades. Nevertheless, it re-mained a relatively low-profile activity un-til the entry in the 1960s of brokerage firms, investment bankers and entrepreneurs all seeking to capitalize on leveraged buy-out transactions because of the high yield that can be realized from a nominal equity investment.

Despite the promise they hold of high yields, leveraged buyout opportunities are difficult both to find and to finance. Al-though there are no sure-fire recipes for chancing on such an opportunity, there is a financial vehicle — the high-ratio asset-based loan — that may make financing one a lot easier. That type of loan will be the main focus of this article, but before we go on to explain in detail how it works, let's examine some of the qualities that make LBOs so attractive and that account for their popularity.

As will be discussed later in this article, conventional lending is made either on an asset or cash flow basis. The high-ratio asset-based loan referred to here is not a conventional asset-based loan, but an approach to an old concept that results in the ability to highly lever assets.

PROVIDING A FULCRUM TO EASE THE BUYER'S

DEBT LOAD

The a l lu re of the LBO

Today, leveraged buyouts (LB Os) have be-come commonplace for a number of rea-sons:

·Conventional banking institutions now accept this transaction method, partly out of the need to show new assets on their balance sheets.

·Lenders can request higher fees and inter-est spreads to offset the increased risk.

·The recessionary demand for corpora-tions to rationalize their business opera-tions has resulted in strategic divestitures: subsidiaries and divisions may be offered to management or others — often at book value.

·The financial community has entered the field by selling financial advisory services to clients and seeking venture capital invest-ments for their own account.

What makes LBOs so attractive? A sin-gle example will easily illustrate why. In January 1982 the Wesrav Corporation ac-quired Gibson Greeting Cards from RCA. Wesray was formed in 1981 by Raymond Chambers and William E. Simon, Gibson's former treasurer.

The total purchase price was $81 mil-lion. Wesrav put up only $1 million; the rest was raised through bank borrowings and real estate leasebacks. Sixteen months after the transaction, Gibson went public.

The 50% interest held by Simon anc Chambers had a market value of £140 rni]-lion. Since then, Wesray has acquired dozen businesses with revenue of more thz:-. $1.5 billion.

With debt to equity ratios as high as K.. to one, the potential for such significant returns on LBO investments has encour-aged many financial groups to establish LBO funds.

Find ing the r ec ipe

There are three essential ingredients in any successful leveraged buyout: I. Established management capable ocoper-ating the company successfully.

2.Sufficient cash flow to pay off the acqui-sition debt and to support capital and oper-ating cash-flow requirements.

3.Sufficient fixed assets to provide for bank liens against assets.

Finding the leveraged buyout opportu-nity, as we've said, is hard enough; financ-ing the transaction is harder still. The typi-cal LBO financial structure is built with these basics:

·An operating line of credit, which is usu-ally secured with accounts receivable and inventory. Normally, it provides sufficient operating cash flows to ensure that operat-ing cycle fluctuations in working capital are fully financed.

·A term facility (representing approxi-mately 50%-60% of the purchase price), secured by operating cash flows and spe-cific assets.

·Subordinated debt (unsecured), which usually represents 25%-30% of the pur-

24 CAMAGAZINE

Milton H. Barbarosh, MBA, MCABV, CA, is manager. mergers and

acquisitions, for the Royal Bank of Canada in Toronto and a lecturer in York University's MBA program.

chase price. Because subordinated debt holders are secondary in all respects to the operating line of credit and the term lenders, some form of sweetener is usually offered to them — such as a provision to convert some of their debt into equtly (should the company either be sold or go public at a future date). To accomplish this, subordinated lenders may take convertible debt or a special equity share.

Term lenders and subordinated debt holders usually require certain covenants to be included in their debt agreements before any funds are forwarded. Examples of such covenants may include these requirements: that no dividends go out to equity share-holders before a sufficient down payment on the debt occurs; that no significant pur-chase, or sale of assets, take place without the approval of these debtors; and that suffi-cient security (in the form of hard assets) be offered to protect these lenders — in panic-ular, the term lender. The term lender nor-mally expects fixed asset coverage of ap-proximately 75% on real estate and 90% on the liquidation value of equipment, although a shortfall may be allowed in some cases.

·Equity, which often represents l0%-2070 of the transaction price, is totally at risk and has no security whatsoever. Besides purring up the initial capital, equity holders are expected to have additional funds in case things don't work out exactly as planned and more cash is needed to tide the com-pany over its business cycle.

Variations on this structure can be nu-merous, but those are the main components involved in most transactions.

Victor Tong, MBA, CGA,

is manager, merger and acquisition advisory services, for the Bank of Montreal in Toronto.

The ro le o f h igh-ra t io asse t -based f inancing

One of the most difficult problems in a leveraged buyout is to find a source for the subordinated (or "mezzanine") debt. Since this type of debt is not secured by any assets, it can be expensive in relation to term debt. Thus, entrepreneurial investors or venture capitalists are often looked to as sources for providing this portion of the financing package.

A high-ratio asset-based loan can help bridge the gap between the term lender

(often referred io as conventional debt or long-term debt) and the subordinated debt holder. By providing a higher lending ratio against assets, it can help equity investors complete the transaction without using ex-pensive venture capital or other funds to fill the mezzanine debt role.

Although it is just one of the parts that can be required in a leveraged buyout, a high-ratio asset-based loan can provide the critical piece to the LBO financing puzzle. But how does a high-ratio asset-based loan fit into the overall structure?

High-ratio asset-based vs. conventional lending

Let's start by examining the differences between a high-ratio asset-based approach and the conventional or asset-based cash flow approach to LBO financing.

In Canada, Schedule A chartered banks have been asset-based lenders. This ap-proach to lending involves securing loans directly to some conservative percentage of the collateral value of the borrower's assets. Asa practical matter, however, a lender looks first to cash flow to provide for or-derly repayment, and second to the assets as an ultimate source of repayment.

In cash flow financing, the lender seeks protection in the borrower's small equity cushion and cash flow. The lender, there-fore, ties the loan to a conservative multiple of the borrower's expected cash flow. This has traditionally been the approach fol-lowed by US banks. With the entry into Canada of foreign banks, this form of lend-ing has become more common here.

JULY 1985 25

High-ratio asset-based lenders may as-- sess credit worthiness by traditional means, but they also maintain an additional per-spective: rather than relying on a large eq-uity cushion, high-ratio asset-based loans are tied to virtually the full marketable col-lateral value of the borrower's assets. These lenders monitor their loans by watching the cash flow.

For the prospective buyer, this basic dif-ference in lending philosophy means more funds are available with the high-ratio as-set-based approach. With this type of loan, the buyer's cash contribution will usually represent only a small portion of the pur-chase price. While conventional financing would require a debt-to-equity ratio not much higher than 1:1, with high-ratio asset-based financing these ratios can go from 4:1 to 10:1 or even higher.

The borrower can realize additional benefits from a high-ratio asset-based fi-nancing package: as accounts receivable and inventories increase, so does .the amount of credit available. In effect, the buyer gains access to a revolving line of credit based on the liquid value of current assets.

On the other hand, .high-ratio asset-based loans generally cost more than con-ventional financing — though not as much as typical subordinated sources like venture capital. Because the lender takes a secur-ity interest in the acquired company's a(-sets, the costs of continuously monitoring those assets are also incurred. These in-chide sales volume, inventory level and cash collections — all of which 'fluctuate on a day-to-day basis. For this reason, high-

ratio asset-based financing is usually priced at one to three percentage points higher than a conventional lending package. De-spite the added cost, it can often be the cheapest means of buying a company, and the higher leverage provided by this ar-rangement usually still delivers a better re-turn on the investor's equity than conven-tional financing.

The balance sheet shown in Exhibit 1 illustrates this point. Let's assume that a conventional lender requires a leverage fac-tor of no more than 1:1, and that a high-ratio asset-based lender might permit a 9:1 factor. A company with S10 million in as-sets would need S5 million in equity to meet the ratio demanded by the conven-tional lender; an asset-based lender could finance the same company with only $1 million in equity.

The comparative income statement is even more interesting. It indicates that the return on equity (ROE) strongly favours the high-ratio asset-based approach, even though the interest rate is three percent-age points higher. If the earnings before in-terest and taxes (EBIT) for this company are 10% on sales of S25 million, the ROE in the high-ratio asset-based scenario would be 73%, but only 22% if financed convention-ally.

Canadian and US lending philosophies There are significant differences in lending philosophies and practices between the Ca-nadian and US marketplaces. US commer-cial banks are usually unsecured lenders. Their main focus is on the borrower's cash

flow positions and financial strength (as measured by equity versus assets). Secured and high-ratio asset-based lending is usu-ally handled by special divisions or subsid I-aries of these banks. This "commercial fi-nance" industry is well developed in the United States, with most of its members involved in high-ratio asset-based lending.

Canadian banks are mainly secured lenders; consequently, a distinction be-tween conventional and high-ratio asset-based approaches is less clear from a Cana-dian perspective, with the issues being a tradeoff of risk and loan pricing.

Canadian factoring companies usually market high-ratio asset-based financing in conjunction with other factoring services. The low demand for business loans in the past few years has pressured Canadian lenders to forego borrower reporting and monitoring requirements to remain com-petitive. For this reason, high-ratio asset-based financing, in its pure form, is not well developed in Canada. But with activity growing in the LBO market, we may well see demand increasing for this type of lend-ing service — especially if the economy im-proves and the demand for commercial loans takes an upward turn.

Our discussion on the high-ratio asset-based lending process and techniques ap-plies to the US financing industry and to those Canadian financial institutions offer-ing high-ratio asset-based loans.

Lending approach and risk evaluation

Implicity, the higher degree of financial leverage allowed to the high-ratio asset-based borrower means a higher degree of solvency risk, since a highly leveraged com-pany must maintain a consistent earning stream to meet its fixed obligations (notably the interest charges). In assessing a partic-ular credit risk, a high-ratio asset-based lender must therefore measure the stability and predictability of the borrower's earn-ings in addition to assessing the liquidation value of the secured assets.

In a leveraged buyout, the risks to the lender can be grouped into three main cate-gories: 1. Business risk. This includes industry risk and company risk. Industry risk is assessed in terms of its historical performance and outlook, and its sensitivity to the swings in the general economy. A company's risk is evaluated in terms of product strength, marker share, its relation to suppliers and customers, production and warehouse facil-ities, distribution capabilities, and its vul-nerability to competitive pressure.

But the most important aspect of the business risk is management capability, which is measured in terms of the knowl-

Exhibit 1

Asset-Based vs. Conventional Lending

Balance sheet IS millions)

Conventional Asset-based

income statement ($000's)

Conventional Asset-based

Total assets 10.0 10.0

Soles 25,000 25,000

Internally generated liabilities 2.5 2.5 EBIT g 10% 2,500 2.500

Interest on

Borrowings 2.5 6.5 borrowings @ 13% 325 0.16% 1.040

Total liabilities 5.0 9.0 Pretax profits 2,175 1,460

After-tax

Equity 5.0 1.0 profits Ce 50% 1.088 730 Equity and

Return on

liabilities 10.0 10.0 equity 22% 73%

Total leverage 1:1 9:1

26 CAMAGAZINE

S

•

•

•

•

edge, expertise, experience and track re-cord of management, as well as its reputa-tion within the industry. A reasonable and comprehensive business plan (if one exists) can often provide valuable insight into the ability of the management group. It cannot be emphasized enough just how fundamen-tal good management is to the success of a leveraged buyout. 2. Collateral risk. In simple terms, collateral risk refers to the probability that the liqui-dation value of secured assets will not be enough to cover the outstanding balance of the loan principal and interest. It is mea-sured as a function of the margin (the per-centage of loan advanced to the value of the assets), the overall liquidity of the assets, the degree of certainty with which the liqui-dation value can be established, and the ability of the lender to monitor and control the assets. 3. Financial risk. Financial risk is the proba-bility of insolvency leading to bankruptcy and the liquidation of assets. The extent of a lender's financial risk depends on two variables: the capital structure and the bor-rowing company's earning power.

The higher the leverage ratio (debt ver-sus equity), the higher the financial risk will

be, because a larger portion of the earning stream is needed to service the debt.

The feasibility of any leveraged buyout is determined by balancing the business, ... collateral and financial risks. in this way, the Sender tries to reduce the overall loss risk to as close to zero as possible. The downside is limited by the liquidation value of the assets, while the upside potential is limited to the yield of the prescribed inter-est rate. These two factors, affecting only the lender, represent the fundamental dif-ference between lenders and equity partici-pants in terms of risk and reward.

Financing criteria

Here are the key factors a lender looks for when deciding whether to finance an LBO.

Company characteristics High-ratio asset-based lenders often

finance well-established manufacturers with a clear-cut record of profitability. The com-pany's maturity means that its working cap-ital requirements are easier to predict, and its slower growth means lower cash require. rnenrs for capital expansion. Manufactur-ing concerns are preferred because they usually have stable, straightforward ac-counts receivables and inventories, plus substantial fixed assets that can be used as collateral.

Of course, management capability is key. The management team must be finan-cially astute and psychologically able to handle a lot of debt. Lenders look for quali-

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ties such as entrepreneurship, leadership and a sense of risk taking when they exam-Me the group's expertise and reputation. Because management capability is para-mount, the lender usually insists that the owners or managers put up a substantial portion of equity in relation to their per-sonal net worth to ensure that the risk falls on the new owners first.

Financial position Along with a consistent earnings record, the lender also looks for a clean balance sheet with assets that would yield a liquida-tion value equal to the purchase price plus ongoing financing needs. These assets should be unencumbered by pledges to other lenders or third parties, and there should be little or no short or long-term debt before leveraging.

Cash flow Cash-flow projections will be subjected to detailed analysis by the lender, who will usually insist that such projections be pre-pared professionally with all the assump-

t ions clearly stated. These assumptions will also be tested and challenged. The basic purpose is to determine the viability of the new acquisition, especially its ability to ab-sorb the additional financial burden created by such heavy financing.

Quality of assets Their quality determines the amount of financing the lender is willing to advance. The rate, or margin, of advance depends on the liquidity of the class of assets and a number of other factors.

Accounts receivable generally has the highest liquidity and, as such, are usually accorded the highest margin. First and fore-most, accounts receivable must be due from firm sales to qualify as collateral. In other words, no account should contain a contin-gency regarding payment.

To determine an eligible base for mar-gin calculations, the lender usually ex-cludes these items as ineligible receivables:

·Consignment sales or progress billings. ·Accounts over 90 days past due. ·Intercompany sales.

·Credit rejects. ·Offset accounts (sales to supplier). After deducting these ineligibles from the

gross account receivables, the margin of advance is then applied to the net to deter-mine the amount available for lending. The maximum advance rate for accounts receiv-able is usually 80%-85%.

Inventory From a lender's viewpoint, inventors' in-cludes only readily saleable items. Nor-mally, the lender does not want to be in-volved in converting inventory into sale-able form. That's why work in progress is usually deemed ineligible. The purchase price of raw material and the cost of fin-ished goods usually support a maximum 50% rate of advance. Perishable items or those subject to high obsolescence, how-ever, receive a much lower margin rate, if they're given one at all.

Machinery and equipment To determine the liquidity and advance rate for machinery and equipment, an out-side appraisal of the liquidation value, also known as "quick sale" value, is required. The advance rates vary from 70%-90% of such value.

P ro s p ec t a s s e s s men t

To assess the borrower's position (in rela-tion to the criteria mentioned previously) and, ultimately, to make a decision on whether to finance the deal, the lender re-quires — as a minimum — the following information: ·A brief description of the proposed fi-nancing plan. ·Background information on the business, including its products, facilities, supplier and customer bases and .organizational structure. ·An industry and market analysis. ·The company's marketing plans and strategies. ·The business plan, with highlights on any proposed changes from the current op-erations. ·The financial statements for the past five years — preferably audited. ·The cash-flow projections for the next three to five years (which should include the impact of the proposed financing). ·A profile of the management team, with resumes for each key member. Most of that information would already

be available in any financing proposal pre-pared by sophisticated borrowers. This would be offered of their own accord (or on advice from their lawyer or accountant) in an effort to speed up the financing decision process.

Exhibit 2

Review of Prospective Borrower Report Format

General information ·Company history. ·Description of business/products. ·Principals and management, including organizational structure and details on any subsidiaries and associated companies. ·Details on bankers. accountants and lawyers ·Labours and unions. ·Competit ion. ·Markets, marketing strategies and channels. ·Production facil it ies. ·Suppliers. ·Distribution channels.

Financial performance ·Analysis of the five most recent financial statements, preferably audited. ·Review of the current year's business plan. including the major assumptions. Compare and analyze the most recent forecast of the current year's results against the business plan.

Soles and accounts receivables ·Soles policy (trade and term discounts). ·Warranties/guarantees. ·Soles statisticsicredit notes. ·Orders on hand. ·Shipping procedure. ·Credit granting procedures, col lection pol icies and pract ices. ·Other major features.

Inventory (if appl icable) ·Analysis of year-end inventory for the past five years by category: row material. work in progress, finished goods.

·Nature and condition of inventory. ·Storage and other locations. ·Length of production cycle. ·Types of records maintained, inventory control procedures.

Accounts payable ·Aged listing of accounts payable. ·Analysis of purchases on which discounts were allowed but riot taken. ·Analysis of purchases and payments to the five largest suppliers. ·Review payments on soles, income and withholding loxes. ·Review payments to principal shareholders.

Cash-flow analysis ·Detailed analysis and review of the cash-flow projections, including the underlying assumptions ·Ensure the impact of cosh flow is properly reflected in the pro-forma financial statements os wet/ as in the inventory schedules.

Fixed assets ·Review book value, oge and depreciation schedule of fixed assets. ·Identity replacement cost, if possible. ·Identity any liens on fixed assets.

Insurance ·Review adequacy of insurance coverage.

Conclusion and recommendations

Including the recap of the critical assumptions and major risks, both short and long terms.

28 CAMAGAZINE

On-si te analys is

One of the most important steps in the lender's decision-making process is the on-site analysis of the prospective borrower's financial records and operations. The pur-pose of this exercise is twofold: to assess the viability of the new company and to ascer-tain the value of the assets for collateral purposes. The emphasis _here is on future performance, not the past record of the business. -

For LBO financing the lender should pay particular attention to the gross profit percentage of the current versus previous years as it relates to actual costs and inven-tory build-ups. Quite often when a com-pany is positioned for a sale, inventory re-serves accumulated over the years are "let out" during the year or two before its sale, thereby creating artificial profits (in the hope of increasing the business' sale price).

If the business being acquired is a sub-sidiary or a division of a larger corpora-tion, the management expense or overhead allocation should be scrutinized; the par-ent company's services should be ascer-tained (such as accounting, data processing, personnel); and the reasonableness of the charges examined. The question of how these services are provided after the sale —and the related costs — should also be ad-dressed. (Exhibit 2 is an example of a pro-forma report high-ratio asset-based lenders use to review prospective borrowers.)

Acco un t mon i to r ing

Because of the inherent risk this type of loan carries and the high fluctuations of the assets' collateral value (accounts receivable and inventory), the high-ratio asset-based lender requires a significant level of report-ing from the borrower. This unique — and elaborate — account monitoring process uses the following techniques:

Daily reporting Quite often the borrower must report sales, collection and inventory activities on a daily basis. In addition, evidence of ship-ping is generally required on any invoices over a predetermined limit. This informa-tion is required to calculate the availability of funds based on the agreed margin of advance. (Exhibit 3 provides a sample re-port that would be required from the bor-rower on a daily basis.)

Weekly reconciliation The balances for the loan, accounts receiv-able and inventory are reconciled frequent-ly (usually on a weekly basis) between the lender's internal calculations and the bor-rower's general ledger.

Accounts receivable confirmation Using techniques not unlike those used in public auditing, the lender usually con-firms the pledged accounts receivable di-rectly with the borrower's customers on a "stratified sampling" basis. The frequency of the confirmations and the size of the samples will depend on the size of the loan and its relative risks.

Quarterly audits or reviews To monitor the borrower's performance, and to ascertain that the value of collateral is still adequate, the lender generally re-quires audits on a quarterly basis. These audits or reviews are usually carried out by the lender's own specialized staff or done by public accountants on contract. Their scope is usually less encompassing than the initial investigation. Nevertheless, they are imposing from the borrower's point of view and therefore provide an important "polic-ing" function on the lender's behalf.

Burdens for lenders and borrowers

The techniques just described represent the key aspects of the high-ratio asset-based lender's account monitoring process. There are other procedures — such as the pre-

authorization of cheques over a specified amount — that could apply to particular borrowing situations, depending on the size and the risk of the loans. Overall, they represent a significant amount of overhead expense to be incurred by the lender, which partly explains why high-ratio asset-based loans are generally one to three percentage points higher in interest rates than conven-tional loans.

For the borrower, these procedures rep-resent a tremendous burden on recordkeep-ing, staffing requirements and the manage-ment team's time. Consequently, any buy-ers of LBOs thinking about high-ratio asset-based financing should be prepared, both physically and psychologically, for the voluminous reporting and close monitor-ing of their business affairs by the lenders.

High-ratio asset-based loans are an effec-tive tool for those leveraged buyouts where the acquired business' assets are strong enough collateral to provide financing for a significant portion of the cash price as well as the funding needs for medium to long-term operations. If the buyer wants to maxi-mize leverage, the high-ratio asset-based fi-nancing approach can be invaluable. Inves-tors should be prepared to pay more for the loan than conventional debt, however, and to have the lender constantly looking over their shoulders. •

Exhibit 3

Doily Report from Borrower

Status of accounts receivable

1. Total receivables previously assigned 2. Add: sales from this dale (invoices attached) 3. Total gross receivables assigned 4. Deduct: (a) collections from this dote

b.deductions and credits c.other adjustments (specify) Total

deductions (o-c) 5. Total net receivables assigned 6. Deduct: (a) ineligible receivables as of (date)

(b) other (specity) 7, Total eligible receivables

8.Maximum loan availability on receivables

Status of loans and advances

9.Beginning loan balance (line 13 of previous report)

10.Deduct: (a) collection this dale (line 4a) (b) adjustments (specity)

11.Subtotal 12.Advances hereby requested 13.New loan balance 14.Availability trom receivables (line 8) 15.AIR surplus or (inventory loan) (line 14-15)

Status of inventory loan

16.Inventory loon balance (line 16, it any) 17.Lost inventory declaration (as of date) 18.% inventory financing (lines 1647)

x x x x x x x x x x

JULY 1985 29

F 'ANCEMENT SPECULATIF ET NANTISSEMENT DES ACTIFS

LE CONCEPT DL' FINANCEMENT SPE-culatif, autrement dit de ]'utilisation de l'effet de levier financier lors de l'achat des actifs ou des actions d'une entreprise dont les previsions de tresorerie semblem suffisantes pour assurer le remboursement de la dette com ractee 5 l'achat, existe depuis le debut du siecle.

Bien que cette facon de proceder ait ere consideree par de nombreuses personnes, dans les premieres annees, comme uneffa-con peu morale de faire des affaires, des acheteurs fort astucieux misent sur l'effet de levier depuis plusieurs decennies. Cease activite est toutefois demeuree relativement peu populaire jusqu'au debut des annees 60, oil les societes de courtage, les preneurs fermes et les speculateurs ont commence 5 s'interesser au financement speculatif, en raison du taux de rendement eleve que Von peut realiser a partir d'un montant minime de capitaux propres.

Les bonnes occasions d'acquerir une en-treprise avec financement par emprunt spe-culatif sont difficiles a trouver, tour comme le financement lui-meme, et it n'y a pas de recette qui garantisse le succes a coup stir. II existe toutefois un mode de financement

pret sur nantissement des actifs — dont Futilisation facilite de beaucoup les chosen. Ce type de pret constitue l'objet principal du present article. Avant de donner plus de

Comrne nous le verrons plus loin dans le present article, le pret traditionnel est consenti soil sur la garantie d'actifs, son sur la base des flux de tresorerie. Le pret sur nantissement d'actifs dont it est question ici n'est toutefois pas le pret traditionnel sur la garantie d'actifs mais une facon nouvelle d'appliquer tin ancien concept, suivant laquelle ]'entreprise petit affecter une part considerable de ses actifs en nantissement de ses emprunts dans le cadre d'une operation de financement par emprunt speculatif.

UNE NOUVELLE FAc0N

D',A J :EGER LE FARDEAU DE LA DETTE

details a ce suiet, nous allons examiner les caracteristiques du financement speculatif et les raisons pour lesquelles cette forme de financement est si populaire.

Comment se passent les chases?

De nos tours, le financement speculatif est devenu chose courante pour un certain nom-bre de raisons:

·Les institutions bancaires traditionnelles acceptent maintenant d'accorder ce genre de financement, notamment parce qu'elles ont besoin de faire figurer de nouveaux actifs dans leur bilan.

·Les preteurs peuvent exiger des frais et des taux d'interet plus eleves afin de contre-balancer le risque accru.

·La necessite pour les entreprises, en pe-riode de recession, de rationalises leur ex-ploitation a entraine des desinvestissements strategiques: des finales et des divisions d'entreprise sons ainsi offertes aux mem-bres de la direction ou a des tiers, souvent la valeur comptable.

·Les financiers ont commence a s'interes-ser au domaine en offrant des services con-seils a leurs clients et en cherchant des investissements spec-ulatifs pour leur pro-pre compte.

Qu'est-ce qui rend le financement spe-culatif si attrayant? Un simple exemple nous aidera a le comprendre. En janvier 1982, Wesray faisait l'acquisition de Gibson

Greeting Cards, qui appartenait anterieu-rement a RCA. La socitte Wesrav avait etE formee en 1981 par Raymond Chambers et William E. Simon, Fancier) tresorier de Gibson.

Le prix d'achat total s'elevait a 81 mil-lions de dollars. Wesray fit tin apport en capitaux propres d'un million de dollars et le solde fut finance au moyen d'emprunts bancaires et de contrats de cession-bail sur des biens immobiliers. Seize mois apres l'acquisition, Gibson emit des actions dans le public. La participation de 50 % detenue par Simon et Chambers atteignit la vaieur marchande de 140 millions de dollars. De-puis lors, Wesray a achete une douzaine d'entreprises avant des produits d'exploita-tion superieurs 5 1,5 milliard de dollars.

La possibilite de realiser des rendements tres importants avec des ratios d'endette-ment aussi eleves que 10:1 a incite de nom-breux groupes financiers a creer des fonds de financement speculatif.

Trouver l a rece t te

Trois elements sent essentiels pour reussir le financement d'une acquisition par em-prunt speculatif:

1.une equipe de direction chevronnee qui soit en mesure de gerer ]'entreprise avec succes

2.des flux monetaires suffisants pour as-surer le remboursement de la dette née de ]'acquisition et faire face aux besoins de tresorerie que suscitent le maintien du capi-tal et les activites d'exploitation

3.des immobilisations corporelles suffi-santes pour assurer le cautionnement au-pres de la banque.

Trouver 12 bonne occasion d'acquerir une entreprise pouvant etre financee par emprunt spec-ulatif n'est pas chose facile, repetons-le, mais l'obtention du finance-ment est encore plus ardue. La structure

30 CAMAGAZINE

fthanciere type de ce genre de financement repose sur les bases suivantes:

·line marge de credit servant a ]'exploi-tation, generalement garantie par ies comp-les clients et les stocks. Cette marge doit normalemem permettre d'avoir une treso-retie suffisante pour que les fluctuations du cycle d'exploitation qui se repercutent sur le fonds de rouiement soient totakment financees.

·Un emprunt a terme (representant envi-ron 50 % a 60 % du prix d'achat) garanti par 4.• les flux monetaires decoulant de i'exploita-tion et par des elements d'actif specifiques.

·Tine dette de deuxieme rang (non ga-rantie) representant generalement 25 % 30 % du prix d'achat. Comme it preteur de second rang passe apres ceux qui ont accorde la marge de credit et le pre a terme, et ceia a tous les points de vue, on leur offre genEralement certaines "douceurs", par exemple la possibilite de convertir une par-tie de leur creance en capitaux propres (ad-venant que l'entreprise soil vendue ou

devienne une societe ouverte, a une date ulterieure). Ce qui peut se faire au moyen d'une dette convertible ou d'un titre de participation speciale.

Les preteurs a terme et les preteurs de second rang exigent generalement certaines clauses restrictives dans leur contrat avant d'avancer les fonds. En vertu de ces clauses, l'entreprise ne peut distribuer de divi-dendes a ses actionnaires ordinaires avant d'avoir fait un remboursement initial suffi-sant; elk ne peut faire ni achat important, ni vente d'actifs sans ]'approbation des pre-teurs; elle doit enfin offrir en garantie un montant suffisant d'actifs corporels pour proteger les preteurs, notarnment le preteur a terme. Ce dernier s'artend normalement une garantie de l'ordre de 75 sur les biens immobiliers et de 90 sur is vakin de liquidation du materiel, meme s'il peut par-fois accepter un peu moths.

Milton H. Barbarosh, B.Comm., MBA, MCABV, C.A., est directeur, fusions et

acquisitions, a la Banque Royale du Canada a Toronto,. ii donne eoolemeni des cours o la York

University dans le cadre du programme MBA.

Victor Tong, MBA, CGA,

est directeur, fusions et acquisitions, a to Banque de

Montreal a Toronto.

·Des capitaux propres, representant sou-vent 10 a 20 % du prix d'achat, qui consti-tuent un risque absolu et ne sont garantis en aucune facon. On attend des personnes qui invest issent des capitaux propres non seule-mem une mise de fonds initiaie, mais egale-ment qu'elles possedent des fonds addition-nels pour le can ou les chosen ne fonctionne-raient pas exactement comme prevu et que l'entreprise air besoin de reunir davantage de liquidites pour traverser avec succes

mutes les etapes de son cycle d'exploitation. Les variances de cette structure peuvent

etre nombreuses, mais ce sont la les princi-paux Elements en cause dans la plupart des operations.

Le nan t i s semen t des act i f s

L'un des problemes les plus difficiles dans une operation de financement speculatif est de trouver une source de financement par emprunt de second rang. Comme ce type d'emprunt n'est garanti par aucun element d'actif, ii peut coiner tres cher: les investis-seurs interesses a speculer et les detenteurs de capital-risque sont generalement recher-chts pour certe part de financement.

Le pret sur nantissement des actifs peut aider a combler le vide qui existe entre le pret a terme (souvent appele dente tradition-nelle cm dente a long terme) et le pret de second rang. En permertant un ratio de financement sur actifs plus Cleve, ce mode de financement aide les investisseurs ac-tionnaires a boucler la transaction, sans qu'ils aient besoin d'utiliser des frais Cleves du capital de risque ou d'autres fonds pour jouer le role de dette de second rang.

Bien qu'il ne soil qu'un des elements necessaires du financement spec-ulatif, le pret sur nantissement des actifs constitue souvent la piece qui permet de completer le pl4771e. Mais comment ce type de pret s'integre-t-ii dans la structure financiere globale?

P re t s t r ad i t i onn e l s e t p re t s su r n an t i s semen t des ac t i f s

Commencons par examiner les differences entre le financement sur nantissement des actifs et le financement traditionnel fondE sur les flux monetaires dans le cadre d'un financement speculatif.

Au Canada, les banques a charte fi-

JUILLET 1985 31

gurant a ]'Annexe A de la Loi sur les ban-ques accordent des prets sur nantissement des actifs. Cette formuie suppose que les prets soient garantis scion un certain pour-centage, determine avec prudence, de la valeur de nantissement des actifs de Fern-prunteur. Dans la pratique, toutefois, les preteurs considerent d'abord les flux de tresorerie en vue d'un remboursement re-gulier, puts les actifs, comme derniere source de remboursement.

Dans le financement fond& sur les flux de tresorerie, le preteur recherche une pro-tection dans la mise de fonds limitee de l'emprunteur et les flux de tresorerie. Le preteur, par consequent, etablit le montant du pret en appliquant un multiple prudent aux mouvements nets de fonds prevus. Cette formule qui est couramment utilisee par les banques americaines tend, depuis ]'entree des banques etrangeres, a se repan-dre au Canada. Les preteurs qui se basent sur les actifs de l'entreprise peuvent evaluer la qualite du credit selon des moyens tradi-tionnels, mais ils y ajoutent une nouvelle perspective: au lieu de se fonder sur un important coussin de capitaux propres, ils considerent la valeur de garantie negociable des actifs de l'emprunteur. Ces preteurs exercent une surveillance stir la tresorerie.

Pour l'acheteur potentiel, cette diffe-rence fondamentale dans les principes qui president au financement se traduit par la possibilite d'obtenir un financement plus

eleve en affectant les actifs en garantie. Dans cc type de financement, rapport en cspeces de racheteur ne represente genera-lement qu'une fa-able portion du prix era-chat. Alors que le financement traditionnel exige un ratio d'endertement qui ne soit pas plus eleve que 1:1, le financement sur nan-tissement des actifs permet des ratios d'en-dettement allant de 4:1 a 10:1, voire des ratios encore plus elevEs.

L'emprunteur pent retirer des avanta-ges additionnels d'un financement sur nan-tissement des actifs: raugmentation des comptes clients et des stocks entraine une augmentation du credit disponible. En ef-fet, l'acheteur acquiert le droit a une marge de credit renouvelable fond& sur la valeur liquide des elements d'actif a court terme.

Les emprunts garantis par les actifs con-tent cependant en general plus cher que le financement traditionnel, tout en demeu-rant moins &ley& qu'une derte de second rang financee par des capitaux de risque. Comme le preteur prend une part de garan-tie dans les actifs de l'entreprise acquise, it doit egalement engager des frais pour sur-veiller ces actifs, en particulier le volume des ventes, le niveau des stocks et le recou-vrement des creances, qui flucruent tous de jour en jour. Pour cette raison, le finance-ment sur nantissement des actifs cane ge-neralement un a trois pour cent de plus que le financement traditionnel. Malgre les coins additionnels, ce mode de financement

demeure souvent le moyen le moins con-teux d'acheter une entreprise, et le ratio de levier plus eleve que permet cc genre d'en tente entraine generalement un meilleur rendement des capitaux propres investis dans l'entreprise, comparativement au fi-nancement traditionnel.

Le bilan donne en exemple au Tableau illustre ce point. Considerons le cas d'un preteur qui accorde un pret de type class:-que permettant seulement un ratio de levier egal ou inferieur a 1:1, et celui d'un preteur qui accorde un pret sur nantissement des actifs permettant un ratio aussi eleve que 9:1. L'acquisition d'une entreprise avant des actifs d'une valeur de 10 millions de dollars necessitera une mise de fonds de cinq millions de dollars en capitaux pro-pres, compte tenu des exigences du premier preteur; par contre, le second preteur pourra financer ]'acquisition de la merne entreprise pour une mise de fonds dun million de dollars seulement.

La comparaison de Fetal des resultats pour les deux types de financement se re-vele encore plus interessame. On volt en effet que le rendement des capitaux propres est bien plus eleve dans le cas du finance-ment sur nantissement des actifs, meme sl le taux d'interet est de trois pour cent plus eleve. En supposant que le benefice avant impots de la societe corresponde a 10 % du chiffre d'affaires de 25 millions de dollars, le rendement des capitaux propres s'elevera a 73 °Jo scion le scenario d'un financement sur nantissement des actifs, alors qu'il ne sera que de 22 To scion le financement de type traditionnel.

Philosophies canadienne et americaine en matiere de prim Les philosophies et les pratiques en matiere de prets different grandement scion que Pon se sinie sur ]es marches canadiens ou americains. Aux Etats-Unis, les banques de commerce pretent generalement sans ga-rantie. Ces banques s'interessent principa-lement a la situation de tresorerie et a la sante financiere de ]'entreprise (mesuree par le rapport entre les capitaux propres et rac-tif). Les prets garantis et les prets sur nan-tissement des actifs sons generalement du ressort de divisions specialisees ou de fi-liales de ces banques. Ce type de finance-ment commercial est bien developpe aux Etats-Unis, et la plupart des membres oeu-vrant dans le domaine s'interessent aux prets sur nantissement des actifs.

Les banques canadiennes, quanta elles, pretent generalement sur la base d'une ga-

rantie. La distinction entre rapproche tra-

ditionnelle et I'approche fondee sur les ac-tifs est done mains claire selon la perspec-

tive canadienne, car on cherche ici a trouver un compromis entre le risque et le coat du financement.

Tableau I

Comparaison du financement de type traditionnel et du financement sur nantissement des actifs

61Ian (en millions tie dollars)

Finoncement Stir

Financement nantissement traditionnel des °Wits

Total

Etat des resultats (en mitliers tie dollars)

Financement SLIT

Financement nontIssernent troditionnel des =tits

Chittre

des comptes 10,0 10,0 arc:Moires 25 000 25 000 Elements de passit d'origine

Benefice d'origine avant

interne 2,5 2,5 impOts 010% 2 500 2 500

Interets sur emprunts

Emprunts 2,5 6,5 @13% 325 016% 1 040

Benefice avant

Passit total 5,0 9,0 impois 2 175 1 460 Capitaux

Benefice opres

propres 5,0 1,0 impot t 50% 1 086 730 Co p Ito LIX propres et

Rendement des capitaux

possit 10,0 10.0 propres 22% 73% Etlet de levier total

1:1 9:1

32 CAMAG A ZINE

Les entreprises d'affacrurage canadien-nes offrent generalement du financement sur nantissement des actifs, conjointement avec les autres activites d'affacturage. faible demande de prets commerciaux qui a prevalu ces dernieres annees a pousse les preteurs canadiens a restreindre ]curs exi-gences en termes de rapports des emprun-teurs et de surveillance de leurs activites pour demeurer concurrentiels. Pour cette raison, le financement sur nantissement des actifs, dans sa forme pure, n'est pas tres developpe au Canada. Cependant, avec la croissance des activites sur le marche du financement speculatif, on peut s'anendre

une augmentation de la demande pour ce type de pret, surtout si la conjoncrure s'ameliore et que la demande de prets commerciaux prend une tendance a la .hausse.

Notre discussion sur le principe du fi-nancement sur nantissement des actifs et les techniques qui en decoulent concerne l'industrie de la finance americaine, ainsi que les institutions financieres canadiennes qui offrent des prets sur nantissement des actifs.

Formale de pret et evaluation du risque

Implicitement, le haut niveau des ratios de levier autorises dans le cas de prets sur nantissement des actifs signifie une impor-tance accrue du risque d'insolvabilite, car les entreprises a ratio d'endettement Eleve doivent realiser des benefices irnportants de facon continue afin de faire face a leurs obligations fixes (notamment le paiement des interets). Pour evaluer le risque lie a l'octroi d'un credit particulier, dans le cadre d'un financement sur nantissement des ac-tifs, le preteur doit apprecier la stabilite et le caractere previsible des benefices de I'em-prunteur, en plus de la valeur de liquidation des actifs constiruant la garantie.

Dans le cas d'un financement speculatif, les risques encourus par le preteur peuvent Etre groupes en trois grandes categories: 1. Risque lie a l'entreprise. Ce risque corn-porte deux volets: le risque lie au secteur d'activite dans lequel oeuvre l'entreprise et le risque propre a l'entreprise elle-meme. Le risque lie au secteur d'activite s'evalue d'apres l'historique des resultats et les pers-pectives dans le secteur ainsi que la sensi-bilite a la conjoncrure economique. Le ris-que propre a l'entreprise s'evalue d'apres la force de ses produits, sa part du marche, ses relations avec les fournisseurs et les clients, ses moyens de production et d'en-treposage, son reseau de distribution ainsi que sa vulnerabilite aux pressions de la con-currence.

Mais l'aspect le plus important du ris-que lie a l'entreprise est la capacite de la

direction, qui s'evalue d'apres les connais-sances, les competences, ]'experience et les realisations passees, sans oublicr is reputa-tion a l'interieur du secteur d'activite. Un plan directeur raisonnable (s'il existe) per-met souvent de se faire une idee juste de is capacite du groupe de direction. On n'insis-tera jamais assez sur ]'importance fonda-mentale d'une bonne gestion pour assurer le succes d'un financement speculatif.

2.Risque lie a la garantie. Pour dire les choses simplement, le risque liE a la garan-tie concerne la possibilite que la valeur de liquidation des actifs nantis ne soit pas suf-fisante pour compenser le solde forme du principal et de l'interet de la dette. Ce ris-que se mesure d'apres le pourcentage du pret consenti par rapport a la valeur des actifs nantis (on parle ici de "marge de pret"), la liquidite generale des actifs, le degre de certitude avec lequel la valeur de liquidation peut Etre determiner et la capa-cite du preteur de surveiller les actifs.

3.Risque financier. Le risque financier est la probabilik que l'entreprise devienne insol-vable, entrainant sa faillite et la liquidation des actifs. L'etendue du risque financier encouru par le preteur depend de deux va-riables: la structure du capital et la capacite de gains de l'entreprise: . Plus le ratio d'endettement (capitaux empninte_s par rapport aux capitaux pro-pres) est eleve, plus le risque financier est grand, car l'entreprise doit utiliser tine por-tion plus importante de ses gains pour le service de la dene.

On determine la faisabilik d'un finance-ment speculatif en soupesant les trois types de risque. De cette facon, le preteur qui s'apprete a consentir un financement sur nantissement des actifs essaie de reduire son risque de perte global au niveau le plus proche possible de zero. Le point le plus bas correspond a la valeur de liquidation des actifs tandis que le point le plus eleve cor-

respond au rendement du taux d'interet prescrit. Ces deux facteurs, qui concernent uniquement le preteur, representent la difference fondamentale entre les preteurs et les investisseurs actionnaires, en termes de risque et de recompense.

Criteres de financement

Voici les principaux facteurs qu'un preteur considere au moment de decider s'il accor-dera ou non un pret speculatif.

Caracteristiques de l'entreprise Les preteurs sur nantissement des actifs financent souvent des entreprises de fabri-cation bien etablies et qui ont fait preuve d'une bonne rentabilite. La marurite de l'entreprise signifie que ses besoins en ma-tiere de fonds de roulement sont faciles a prevoir, et sa croissance moindre signifie

des besoins de tresorerit moins Eleves pour son expansion. Les entreprises de fabrica-tion se voient accorder la preference car elks possedent gEnEralement des comptes clients et des stocks stables et reg-uliers, ainsi que des immobilisations corporelies importantes qui peuvent Etre utilisEes comme garantie.

Bien entendu, la capacite de la direction est un element-cle. L'equipe de direction doit etre fmancierement habile et psycholo-giquement capable de fonctionner avec une dette elevee. Les preteurs recherchent des qualites comme le sens de l'initiative et du risque et ]'esprit de leadership, lorsqu'ils examinent la competence et is reputation du groupe. Comme la capacite de la direc-tion est fondamentale, le preteur insiste generalement pour que les proprietaires ou les dirigeants fassent une mise de fonds representant une portion substantielie de leur avoir personnel net, afin de s'assurer que le risque retombe d'abord sur les nou-veaux proprietaires.

Situation financiere En metric temps qu'un dossier soutenu de benefices, le preteur cherche egalement un bilan en bonne sante, presentant des actifs avec une valeur de liquidation egale au prix d'achat plus les besoins financiers de finan-cement de ]'exploitation. Ces actifs ne doi-vent pas avoir etc affectes en garantie au-pres d'autres preteurs ou de tiers, et l'entre-prise ne devrait pas avoir de dettes a court ou a long terme, sinon tres peu, avant le nouveau financement.

Tresorerie Les projections de tresorerie feront l'objet d'une analyse detaillee par le preteur, qui insisters generalement pour que celles-ci soient preparees de facon professionnelle, avec indication precise de toutes les hypo-theses utilisees. Ces hypotheses seront tes-tees et remises en doute. Le principal but vise est de determiner la viabilite de l'entre-prise nouvellement acquise, notamment sa capacite a assumer le fardeau financier ad-ditionnel tree par un financement aussi eleve.

Qualize des acrifs La qualite des actifs determine le montant du financement que le preteur acceptera d'accorder. La marge de pret consentie de-pend de la liquidite de la categoric d'actifs affectee en garantie et d'un certain nombre d'autres fact curs .

Les comptes clients constituent genera-lement la categoric avant la plus forte liqui-dize et, pour cette raison, on leur accorde habituellement la marge la plus elevEe. D'a-bord et avant tout, les creances doivent re-sulter de ventes fermes pour Etre acceptees comme garantie. En d'autres termes, le re-couvrement des creances doit Etre assure.

JUILLET 1985 33

Pour calc-uler la marge de prat conscntira sur les comptes clients, Ic pre-tcur considerc generalement comme inad-missibles les Elements suivants:

·ventes en consignation et elements fac-tures au prorata des travaux

·creances de plus de 90 jours ·ventes interentreprises ·credits refuses ·creances qui s'annulent (ventes a un four-

nisseur). Apres deduction de ces Elements non

admissibles du montant brut des comptes clients, on applique la marge de prat au montant net afin de determiner le montant qui pourra etre prate. Le taux maximum de prat pour les comptes clients se sirue gene-ralement entre 80 % et 85 %.

Stocks Du point de vue du preteur, les stocks corn-prennent tous les elements qui sons imme-

diatement vendabics. Normalement, en ef-let Ic preteur n'est pas interesse a completer la fabrication. C'est pourquoi les produits en cours sons generalement consideres comme non admissibles. Pour Ic prix d'a-chat des matieres premieres et le tout des produits finis, on applique generalement un taux maximum de prat de 50 %. Les biens perissables et ceux qui peuvent deve-nir rapidement obsolescents se voient toute-fois attribuer une marge moths elevee, dans les cas oti Ion accepte d'en tenir compte.

Materiel et outillage Pour determiner la liquidize du materiel et de l'outillage et la mane de prat qui sera appliquee A ces elements d'actif, on de-mande une evaluation independante de la valeur de liquidation, appelee aussi valeur de revente rapide. Les marges de prat pour ces elements varient de 70 'Io a 90 % de leur valeur de liquidation.

Evaluation du projet

Pour evaluer la situation de l'emprunteur (d'apres les criteres deja mentionnes) et. fi-nalement, pour prendre une decision en cc qui concerne le financement du proiet, le preteur exigera au minimum les renseigne-ments suivants: ·breve description du programme de fi-

nancement propose ·renseignements de base sur l'entreprise. notamment ses produits, ses installations de production, ses fournisseurs et ses clients el sa structure organisationnelle ·analyse du secteur d'activite et du marche ·plan directeur de l'entreprise, avec mise en relief des changements proposes en matiere d'expioitation ·etas financiers, de preference verifies, des cinq derniers exercices ·projections de tresorerie pour les trois cinq exercices a venir (incluant l'incidence du financement propose) ·profil de l'equipe de direction, avec COOT-donnees de chaque membre occupant un poste-cle. On devrait retrouver la plus grande par-tie

de ces renseignements dans les de-mandes de financement déjà presentees par les emprunteurs bien organises, qui les au-ront fourths de leur propre initiative (ou sur le conseil de leur conseiller iuridique ou de leur expert-comptable), en y-ue d'accelerer le processus decisionnel concer-nant le financement.

Analyse sur place

L'une des Etapes les plus importantes clans . la prise de decision du preteur est l'analvse effecruee sur place des registres financiers et des operations de l'emprunteur potential. Ce faisant, le preteur vise deux buts: era-luer la viabilite de la nouvelle entreprise et s'assurer de la valeur des actifs pou rani servir de garantie. L'accent est mis ici stir le rendement furur, et non sur les resultats anterieurs de l'entreprise.

Pour un fmancernent sur nantissement des actifs, le preteur dolt accorder une at-tention particuliere au pourcentage que re-presente le benefice brut du dernier exer-cice par rapport aux benefices bruts realises au cours des exercices anterieurs, dans la mesure ou it revele les coats reels et les accumulations de stocks. Tres souvent, en effet, lorsqu'une entreprise est sur le point d'etre vendue, on "laisse partir" les stocks qui ont Ere accumules au cours des annees durant le dernier ou les deux derniers exer-cices, de facon a creer des profits artificiels (dans I'espoir d'augmenter le prix de vente de l'entreprise).

Si l'entreprise qu'on envisage d'acqueru est une filiale ou une division d'une grande societe, la repartition des frais de gestion et

Tableau 2

Examen du dossier des emprunteurs potentiels

information generole ·Flistorique de l'entreprise ·Description de l'entreprise et des produits ·Dirigeonts et gestionnoires. y compris lo

structure orgonisotionnelle et ies details concernont les finales et les societes apparentees

·Details sur les banquet. les experts-comptables el les conseillers juridiques

·Main-d'oeuvre et syndicats ·Concurrents ·Marches, strategies et circuits de

commercialisation ·Installations de production ·Fournisseurs ·Reseaux de distribution

Resuttats financiers ·Analyse des cinq derniers &tots financiers

(de preference verifies) ·Examen du plan directeur pour l'exercice en

cours, y compris les prIricipoles hypotheses — comporer et analyser les previsions les plus recentes concernont I'exercice en cours el le plan directeur

Venters of comptes clients ·Politique de vente (remises et escomptes) ·Goronties ·Statistiques concernont les ventes et les

notes de credit Carnet de commandes

·Expeditions ·Modatites de credit, principes et pratiques

de recouvrement ·Autres caracteristiques importantes

Stocks (le cas echeent) ·Analyse des stocks de cidture pour les cinq

derniers exercices, par cotegorie de produit: matieres premieres, produits en cours, prodults finis

·Nature et Clot des stocks ·Lieux d'entreposage et outtes sites ·Duree du cycle de production ·Types de registres et precedes de gestion des stocks

Fourntsseurs et autres crediteurs ·Lime chronologique des comptes fournisseurs ·Analyse des achots pour lesquels on ne s'est pas prevalu des remises offertes ·Analyse des ochats et des paiements aux cinq principoux fournisseurs ·Examen des remises de le lose sur les ventes, ' des impOts sur le revenu et des retenues solonoles ·Examen des versements felts oux principoux octionnoires

Analyse des mouvements de tresorerle ·Analyse detainee et examen des projections de tresorerie, y compris des hypotheses utilises ·Exomen visont d assurer que l'incidence des mouverrients de tresorerie est oclequoternent refletee dons les etcrts financiers pro forma ainsi que dons les tableaux concernont les stocks

immatellisations ·Examen de is valeur comptable, de l'onciennete et du tableau d'amortissement des immobilisations ·Determination du coOt de rempiocement (si possible) ·Recensement de toutes les sOretes reelles pouvanf exister sur les immobilisations

Assurance ·Examen du caroctere odeoual de la protection

Conclusion et recommandcrtions Insertion d'un tobleau recapitulatif des hypotheses-cies critiques et des principoux risques, tont 6 long qu'd court terrne.

34 CAMAGAZP.,T

des frais generaux doit titre examinee en profondeur; on doit aussi verifier les ser-vices accordes par la societe mere (compta-bilite, informatique, personnel, par exem-pie) ainsi que le caractere raisonnable des montants factures. On doit s'interroger sur la facon dont ces services seront assures apres la vente, ainsi que sur leurs coins. (Le Tableau 2 fournit un exemple de rapport pro forma utilise par un preteur pour eva-luer la qualite des emprunteurs potentiels, dans le cadre d'un financement sur nantis-sement des actifs.)

Surveillance des comptes En raison du risque inherent lie a ce type de pret et des nombreuses fluctuations de la valeur des biens donnes en garantie (comptes clients et stocks), le preteur exige de l'emprunteur un niveau important d'in-formation. Ce processus de surveillance des comptes, unique et tres dlabore, irnplique l'utilisation de techniques particulieres qui sont examinees ci-dessous.

Rapport quotidien Tres souvent, l'emprunteur doit faire quoti-diennement rapport sur ses ventes, ses re-couvrements et ses stocks. Il doit en outre fournir la preuve que les produits ont ete iivres pour les factures ciepassant tin mon-tant determine. Cette information est exi-gee en vue du calcul des fonds disponibld, qui dependent de la marge de pret accordee. (Le Tableau 3 fournit un exemple de rap-port quotidien devant titre fourni par l'em-prunteur.)

Rapprochement hebdomadaire des comples Les soldes de I'emprunt des comptes clients et des stocks font l'objet de rapprochements frequents (generalement hebdomadaires) entre les calculs internes du preteur et le grand livre general de l'emprunteur.

Confirmation des comptes clients Au moyen de techniques similaires a celles qu'utilisent les verificateurs, le preteur de-mande habiruellement confirmation des creances donnees en garantie directement aux clients sur une base d'echantillonnage stratifie. La frequence des confirmations et la taille des echantillons dependent de ('importance du prEt et des risques qui y sont lies.

Verifications ou examens zrimestriels Pour surveiller les resultats de l'emprun-teur et pour s'assurer que la valeur des biens donne's en garantie est toujours adequate, le preteur exige generalement une verifica-tion tom les trimestres, Ces verifications ou examens sont generalement effectues par le personnel specialise de l'entreprise ou par des experts-comptables travaillant sous

contrat. Ces verifications ont gentralement uric portee moindre que l'etude initiate. Neanmoins, titles exigent beaucoup de la part de l'emprunteur et constituent par consequent un important controle de la part du preteur.

Contraintes pour le preteur et l'emprunteur

Les techniques decrites ci-dessus consti-tuent les Elements-clEs du processus de sur-veillance des comptes dans le cas d'un pret sur nantissement des actifs. II existe d'au-tres procedes, par exemple l'autorisation prealable des cheques depassant un certain montant, que l'on peut appliquer dans des situations particulieres, compte tenu de l'importance du pret et du risque lie a ce pret. Dans l'ensemble, ces procedes se tra-duisent par des frais genera= importants pour le preteur, ce qui explique en partie pourquoi ces prets sont generalement consentis a des taux d'interet de un a trois pour cent plus eleves que les taux d'interet demandes pour les prets traditionnels.

Pour l'emprunteur, ces procedes se tra-duisent par un fardeau considerable en

termes de registres a tenir, un accroisse-merit des besoins en personnel et un inves-tissement en temps de la part de l'equipe dc direction. Pour ces raisons, les emprun-teurs qui songent a obtenir du financement sur nantissement des actifs dans le cadre d'un financement spec-ulatif devraient Cue prepares, tam physiquement que morale-ment, a presenter une information finan-ciere volumineuse et a accepter une surveil-lance etroite de leurs affaires de la part du preteur.

Les prEts sur nantissement des actifs constituent un outil efficace pour le finan-cement d'une acquisition lorsque les actifs de l'entreprise absorb& constituent une ga-rantie suffisamment forte pour obtenir un prEt correspondent a une portion irnpor-tante du prix d'achat, ainsi que les fonds suffisants pour les operations a moven ou long terme. Si l'acheteur cherche a maximi-ser l'effet de levier, le financement sur nan-tissement des actifs peut se reveler un outil precieux. Les investisseurs doivent cepen-dant accepter de payer davantage pour ce genre d'emprunt que pour une date classi-que et d'avoir constamment le preteur derriere le dos. •

Tableau 3

Rapport quotidien de l'emprunteur

Situation des comples clients 1.Total des creances dela mobilisees

2.Ajouter: ventes 6 cornpter de cette date (factures ci-lointes)

3. Montant brut total des creonces mobilisees 4. Deduire, a) recouvrements depuis aerie date

(rapport el-Joint) b.prelevements et

credits (documents ci-joints)

c.outres redressements (precIset) Total des deductions (o-c)

5. Montont net total des creances mobilisees 6. Deduire: a) creances non odmissibles en date du .. b)

outres (preclser) 7. Total des creances admissibles 8. Pret maximum disponible sur nontissement des comples clients

Situation des prets et des avonces debiteurs 9.Solde, au debut (ligne 13 du precedent rapport)

10.Deduire: a) recouvrements 6 acne dote (ligne 4o)

b) redressements (preciser) 11.Somme partielie 12.Avances demandees 13.Nouveau solde 14.Prot disponible sur comples clients (ligne 8) 15.Excedent des comptes clients ou (pret sur stocks) Ilignes 13 et 14)

xxxxx xxxxx

Situation du pret sur stocks 16, Solde du pret stir stocks Plane 16, le cos echeant)

17.Derniere declaration concernont les stocks (date) 18.Pourcentoge du financement sur stocks (lignes 16 et 17)

xxxxx XXXXX

JUILLET 1985 35