Cisco, Tilray, Aurora Cannabis, Alibaba, Trade Talks – 5 Things You Must Know

Here are five things you must know for Wednesday, May 15:

1. — Stock Futures Lower Amid Subsiding Trade War Worries

U.S. stock futures were lower Wednesday though sentiment was lifted by a softening of the rhetoric from Donald Trump in the U.S.-China trade war and suggestions that talks could resume in the coming weeks.

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Markets also were soothed by weaker-than-expected economic data from China that pointed to not only slowing growth in the world’s second-largest economy but also a weakening bargaining position in Beijing’s trade standoff with Washington.

With Trumps describing the dispute with China as “a little squabble” on Tuesday, as well as confirmation from the U.S. Treasury that Secretary Steven Mnuchin will soon travel to Beijing to resume trade talks, markets were happy to add risk following Tuesday’s gains on Wall Street.

Contracts tied to the Dow Jones Industrial Average fell 85 points, futures for the S&P 500 declined 8.70 points, and Nasdaq futures were down 23 points.

The economic calendar in the U.S. Wednesday includes Retail Sales for April at 8:30 a.m. ET, the Empire State Manufacturing Survey for May at 8:30 a.m., Industrial Production for April at 9:15 a.m., and Oil Inventories for the week ended May 10 at 10:30 a.m.

2. — Cisco, Alibaba and Macy’s Report Earnings Wednesday

Alibaba Group Holding (BABAGet Report)  posted stronger-than-expected fiscal fourth-quarter earnings as consumer growth on its online marketplace surged and its tie-up with Starbucks (SBUXGet Report) , the world’s biggest coffee chain, helped boost revenue and its cloud computing sales surged.

Macy’s (MGet Report)  earned 44 cents a share on an adjusted basis in the first quarter, higher than estimates of 33 cents. Same-store sales rose 0.7% in the quarter vs. estimates that called for a decline of 0.6%.

Earnings reports are also expected Wednesday from Cisco Systems (CSCOGet Report) and Jack in the Box (JACKGet Report) .

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3. — Tilray Rises After Revenue Beat, Aurora Cannabis Slumps

Tilray  (TLRY) shares were rising 4% to $50.71 in premarket trading Wednesday after the Canadian cannabis company posted stronger-than-expected first-quarter sales, while its domestic rival Aurora Cannabis (ACBGet Report) slumped after revenue missed analysts’ forecasts amid caps on retail store growth in the Canadian market.

Tilray said first-quarter revenue rose 195% from a year earlier to $23 million, as sales in Canada surged following the country’s decision to legalize cannabis for recreational use. The adjusted loss in the quarter was 27 cents a share, wider than analysts’ estimates, after a 5.7% drop in the average price per kilogram sold.

CEO Brendan Kennedy also said Tilray was looking to further its partnerships with U.S. and international companies as the potential $150 billion global market for cannabis undergoes a generational change in both regulation and consumer acceptance.

“We’ve been inundated with contacts from Fortune 500 companies who are interested in exploring partnerships with Tilray,” Kennedy told investors on a conference call late Tuesday. “And it’s a range of companies from a broad variety of industries.”

“We’re also starting to have conversations with U.S. retailers who are interested in carrying CBD product in the second half of this year,” he added.

Aurora Cannabis, meanwhile, was tumbling 4.7% to $7.99 in premarket trading after its fiscal third-quarter revenue of C$75.2 million missed Wall Street forecasts of C$77.2 million and consumer cannabis sales were just under C$30 million as provincial regulators limited the number of retail outlets.

The company reported a loss attributable to shareholders in the quarter of $C158 million said Aurora Cannabis said it was “well positioned to achieve positive EBITDA beginning in fiscal Q4.”

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4. — Walmart Considering IPO for U.K. Unit Asda

Walmart (WMTGet Report) is considering an initial public offering for its U.K. grocery subsidiary Asda, a listing that that could value the company at as much as an estimated 8.5 billion pounds ($11 billion), Bloomberg reported.

The news comes just weeks after U.K. antitrust regulators blocked a planned merger between Asda, Britain’s fourth-largest supermarket, and rival J Sainsbury.

“While we are not rushing into anything, I want you to know that we are seriously considering a path to an IPO,” Judith McKenna, the company’s international chief, told employees at an event in Leeds, according to a summary of the event provided by Asda. Any preparations for going public would “take years,” she said, Bloomberg reported.

5. — Nelson Peltz’s Trian May Wage Activist Campaign at Legg Mason – Report

Nelson Peltz’s Trian Fund Management may wage an activist campaign at Legg Mason (LMGet Report) and push the mutual fund company to improve its flagging results, The Wall Street Journal reported, citing people familiar with the matter.

It would be the second time in 10 years that Trian has targeted the mutual fund company, according to Reuters.

Trian recently has held discussions with Legg Mason about the need to cut costs and improve profit margins, the people told the Journal. The two sides may still negotiate a settlement that sidesteps a proxy fight, the sources added.

On a conference call with analysts Monday, Legg Mason CEO Joseph Sullivan said the company was moving to slash expenses.

“While there is much work to be done, we now have increased visibility into and have gained even greater confidence in our ability to deliver $100 million or more of annual savings now within two years,” he said.

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Source: Cisco, Tilray, Aurora Cannabis, Alibaba, Trade Talks – 5 Things You Must Know

How to Position Your Business for a Strategic Acquisition – Mark Daoust

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In the past year, I’ve had multiple competitors approach me to acquire one of the businesses that I own.

Being approached by competitors — or anyone for that matter — is always flattering, but, more importantly, it opens a door for many business owners that they have not considered in the past: selling their business. If you’ve ever thought about selling your business, you likely thought about selling it to a strategic buyer — a larger company in your industry, a competitor or a business in a neighboring industry that could benefit from something you’ve buibuyers stlt.

While most acquisitions that occur are not strategic exits — most businesses are sold to financial buyers (i.e. buyers who like the financials of the business but do not necessarily gain a strategic advantage by acquiring that business) — there can be significant benefits for you if you are able to find a strategic buyer:

  1. More money. Strategic buyers often see stronger returns on their investment which allows them to pay more for your business. For example, an ecommerce business that has a large warehouse may be able to acquire a smaller, but similar ecommerce business without adding new warehouse and order fulfillment costs. Strategic acquisitions can often represent huge gains in the value you get for your business.
  2. Easier transitions. Because the buyers are already familiar with your industry, the transitions are often easier to manage — but not always.
  3. Strategic buyers can often do more with your business. Because strategic buyers know your industry, they can often build your business rapidly after the sale. If you are interested in seeing your business grow, strategic sales can be a great way to go.

But for all the benefits of strategic acquisitions, most small business owners who decide to sell their business will end up looking for a financial buyer. Why is this?

Why strategic exits are often difficult to pull off

While many business owners think that a strategic exit is the most natural or the easiest type of acquisition to complete, the truth is that it often has the lowest chance of success. Most acquisitions occur to financial buyers — acquiring companies who may not have specific industry knowledge, expertise or advantage when buying your business, but like the potential financial return on investment your business provides.

There are several reasons for this. First, if you are trying to sell your business to someone within your industry or marketplace, you often lack leverage. The reason for this is simple. Rather than having potential buyers line up to acquire your business, you are approaching potential acquirers with your business opportunity. Unless you can generate interest from multiple suitors, this approach tells potential acquirers that they have more leverage when dictating the terms of a potential deal. They know you are looking to sell, and they know that you prefer to sell to them.

Second, strategic exits often fail to materialize simply due to bad timing. Unless the company you are approaching to make a deal is a massive enterprise, most acquirers need to plan out their resources — both in capital and work requirements — in order to successfully complete a merger or acquisition. When you approach a potential strategic acquirer, even if there may be a good fit between your company and theirs, the timing might simply not be right.

Finally, the pool of strategic acquirers is usually quite small. How many companies would benefit from a strategic acquisition of your firm? Two? Five? Fifteen? The fact is, when selling any company, having a larger pool of buyers gives you better leverage and better chances of success.

Tips for planning and executing a strategic exit.Despite the obstacles above, planning a strategic exit is possible. This very publication is filled with tips on how to get your company acquired. However, too few business owners put any thought into what is actually needed in order to pull off a successful strategic exit. With that in mind, here are a few practical tips to prepare for a potential and hopeful strategic exit:

  1. Strategic exits usually start early. A strategic acquisition rarely happens as the result of picking up the phone, calling a competitor and asking if they want to buy your company. Sure, there are the rare cases where this approach succeeds, but most strategic exits happen more organically. The two companies know each other, have known each other for some time, and see that the acquisition would be good for both companies.
  2. Build your strengths to address other business’s weaknesses. If a wholesaler decides to enter into the direct to consumer market, they often do so by acquiring one of their clients. This is because they recognize that their weakness (direct to consumer) is their client’s strength. If you are hoping to be acquired by a larger competitor, get to know their relative weaknesses, and build your company to be strong in those areas. This isn’t just good acquisition advice, this will help you differentiate your business in the marketplace.
  3. Have more than one potential suitor in mind. Acquisitions work best for the selling company when they have the option to decline any particular offer. If you have multiple companies that could acquire your business, you not only increase your chances of a successful acquisition, you also set yourself up for potentially having leverage in a negotiation.
  4. Let potential acquirers know in advance that your business might be acquirable. In most strategic acquisitions that I’ve seen successfully completed, the company that is acquired had a previous relationship with the acquiring company and informed them that selling might be an option they would explore in the future. By letting your intentions be known early, you give potential acquirers the time and the ability to consider acquiring your business as a part of their strategic plans.
  5. Be patient. The strongest leverage any business owner has in an acquisition is the ability to walk away from the negotiation table. If the terms you are receiving aren’t right, walk away.

Finally, consider a non-strategic acquisition

When I started Quiet Light Brokerage, my very first client owned a business in an industry that had aggressive strategic acquisitions occurring on a weekly basis.

In this industry, valuations were mostly based on a simple monthly revenue valuation approach. Businesses in this vertical would sell for anywhere between 10-18 months worth of gross revenue. For my client, this translated into a valuation of roughly $500,000 for his business.

While we could have sold his business for that price and had a closed deal in just a few weeks, we decided to look for a financial buyer. Three months later, he closed on the sale of his business for $625,000 to a buyer who was not a part of his industry, but loved the opportunity he saw.

The fact is, while strategic acquisitions often result in higher — sometimes significantly higher — valuations, this isn’t always the case. The fact is, more deals are completed in a financial acquisition space simply due to the fact that there are so many more financial buyers looking for good investments.

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