June 6, 2017                     Next Issue: Tuesday, June 24
In this issue: Location and Logistics: Risky Business?, and ten news article commentaries relevant to business transition/valuation.

Location and Logistics: Risky Business?
Ian R. Campbell, Business Transition Counsel Inc.
In This Issue

All business owners and their advisors should carefully consider the apparent underpinnings of a Canadian plant closure announced May 24, 2017 by Proctor & Gamble (P&G).

Three important questions that beg to be answered are - irrespective of geography:

1.    Is business size increasingly - and for many reasons - taking on a "life of its own" in the context of the long term business viability of some medium and small sized companies?
2.    Is this Proctor & Gamble announcement a further directional indicator that this "business size" issue should be disconcerting for owners of mid-sized and smaller business owners - irrespective of jurisdiction?
3.    Will "big data" analysis tools and other technological advances increasingly result in larger companies making business decisions that will significantly directly and indirectly impact many medium and small-sized companies?

P&G announces Canadian plant closing!

On May 24, 2017 P&G announced it was:

1.    permanently closing a manufacturing plant in Brockville, Ontario (red arrow on map) in late 2020. That plant employs just under 500 people. It is reported to be Brockville's largest employer. It manufactures P&G's "Bounce" and "Swiffer" products.
2.    over the next three years moving that plant's production to a new manufacturing facility it currently is building in Martinsburg, West Virginia (green arrow on map). Martinsburg is 53 road-miles .....
Our book 50 Hurdles: Business Transition Simplified gets terrific reviews - read testimonials. Visit now to buy your copy. Read it, and then use it as a reference tool.
News Headlines, Article Links, Curation
 Ian R. Campbell, Business Transition Counsel Inc.

In the past two weeks the following articles relevant to Business Transition and Valuation have been selected from a population of approximately 5,000 articles.

Selected articles and curation comments are organized under the following headings:
Business Transition News, Business Valuation News, Technology News, Economic News, and Financial Markets News.
Please forward to a friend or colleague!

Business Transition News

  Is AI the end of jobs or a new beginning? Reading time 3 minutes, thinking time longer. The Washington Post, May 31, 2017.

Comment: This is another article that purports to address one of the most important questions facing society generally, and business owners specifically. Like most articles and studies that discuss the development of artificial intelligence and technology advances this article:

1.    raises the specter that jobs will be lost to technology going forward.
2.    does not canvas the question as to whether technology advances are Darwinian. That is, on balance do they favor greater over lesser intelligence among individuals?
3.    offers no answer or opinion as to whether AI and technology advances will result in "net negative" or "net positive" employment.
4.    offers no opinion as to whether job net losses or gains may be different among developed and developing countries.

Ongoing technology advances are a big deal. I believe them to be Darwinian. I currently believe ongoing technology advances are likely to result in "net negative" employment in both developed and developing countries. Whether I am right or wrong in this is a potential "big deal" either way.

I continue to read everything I can find on technology advances and their potential impact on employment to either confirm or alter my current thinking. I suggest business owners and their advisors do likewise, form their own opinions, and then act on those opinions in the contexts of their own unique businesses. 

*          *          *          *          *

Ontario to increase minimum wage to $15 an hour in 2019
Reading time 2 minutes, thinking time longer. Ottawa Citizen, May 30, 2017.

Comment: I frequently say in articles and commentaries that business owners and their advisors need to carefully consider the likelihood that going forward governments may negatively alter the cost structures of businesses through taxation and other legislation/regulation.

On May 30 Canada's Province of Ontario announced an over 30% increase to its minimum wage regulation. About 2/3rds of that increase will take effect in seven months, with the balance being added in 2019. This may prove to be a big deal to many small Ontario businesses. Time will tell.

Governments everywhere and at all levels will increasingly be looking to raise revenues and reduce government social spending. This in the face of the continuing escalating annual deficit spending of many of them.

Watch for more of this, and if you are a business owner consider it carefully in your near- and long-term business and transition planning.

*          *          *          *          *
At least 22 killed in explosion at Ariana Grande concert. Reading time 7 minutes. Fox Business, May 22, 2017.

Comment: The referenced article is about the May 22 Manchester UK music concert terrorist atrocity. This commentary extends that news to bring one little talked about consequence of terrorist activity to the attention of business owners and their advisors that in the end will almost certainly indirectly impact all businesses.

Terrorist attacks have, and will continue, to result in infrastructure costs in most countries that have to be funded by taxpayers. For example, as a result of the Manchester attack it was reported this morning that U.S. Homeland Security had stepped up its activity.

The U.S. Homeland Security budget almost doubled in 2003 from 2002 (to $38 billion from $20 billion), and in 2017 was $41 billion - the latter contrasted with the U.S. CIA and FBI 2017 budgets of $15 billion and $8 billion respectively. This does not include incremental policing and other costs that directly and indirectly track to terrorism concerns and events.

Eventually the "Piper must be paid". The question is by whom. While somewhat obscure, terrorism prevention is a potential incremental uncontrollable business cost that business owners and their advisors should ponder in the context of business transition planning.
Business Valuation News

Four Simple Ways to Increase Your Business Value. Reading time 2 minutes. Divestopedia, May 8, 2017.

Comment: This article highlights organic growth, efficiencies and cost reductions, new developments and acquisitions as four ways to increase business value. It fails to discuss the one thing I believe is critical to growth in business value, being continually improving corporate governance. You can read more about that at Family business corporate governance and business value.

Technology News

Playing catch-up in advanced analytics. Reading time 5 minutes. McKinsey & Co., April 2017.

Comment: This McKinsey article on big data analysis by large consumer packaged goods (CPG) companies includes several examples of savings and benefits realized by them through data analysis and results implementation.

Business owners and their advisors might want to read this article, as for me it emphasizes that going forward "size may matter" in important "big data analysis" ways in the inter-corporate competitive landscape. If I am right in this and business owners and their advisors focus on it, that may lead to altered business transition decisions. 
Economic News 

We May Be Closer to Full Employment Than It Seemed. That's Bad News. Reading time 2 minutes, thinking time longer. The New York Times, June 2, 2017.

Comment: On June 2 the U.S. Labor Bureau reported a May U.S. jobs increase of 138,000. 2/3rds of those jobs were attributed to the food services, health care and professional & business services sectors. The previous two months jobs report numbers were in aggregate revised downward by 66,000.

Average reported monthly U.S. jobs gains over the past year have been about 180,000. Over the three-month period ended May 31 average monthly jobs gains (as now adjusted) have been about 120,000. This is worth careful thought, as in May the number of people who reported "having jobs" dropped by 233,000 and the "number not in the labor force" increased by 608,000 - see referenced New York Times article.

The latter two numbers combined with the reported May jobs increase resulted in the U.S. unemployment rate falling to 4.3%. For some commentators any unemployment rate under 5% constitutes full employment - being an unemployment rate where the labor market arguably is not cyclically weak and does not fuel inflation.

We live in interesting economic and business times where reported statistics:

1.    don't always mesh with economic theory.
2.    are described in such a way that things may not always be in fact what they seem to be.

In the world's most important economy the reported unemployment rate is well under 5%, yet as late as May 31 Federal Reserve officials were reported as being "concerned about stilted progress on inflation" meeting the Fed's annual 2.0% target rate. See US economy ambles on but few signs of inflation pressures: Fed. This is something business owners ought to consider speaking with their advisors and each other about.

*          *          *          *          *

Monte dei Paschi says in exclusive talks over bad loan sale. Reading time 2 minutes, thinking time longer. Reuters, May 29, 2017.

Comment: Is Monte dei Paschi, Italy's oldest and 4th largest bank, another "too big to fail", "or too revered to fail" case?

This Reuters article describes the methodologies being considered to deal with what at the end of 2016 is reported to have had U.S.$29 billion (with a "b") in "gross defaulting debts". Those methods include repackaging tranches of bad loans as securities, and selling other tranches to institutional investors with government guarantees. Monte dei Paschi failed to raise funds last December. The article notes two other Italy regional lenders with a combined capital shortfall of 6.4 billion euros.

One can only wonder at what point Italy or other Eurozone country governments without their own sovereign currencies (and hence indirectly their populaces) can continue to support "for profit" banking and other lending organizations that have significant bad debt risk.

The Monte dei Paschi will continue to unfold in coming weeks. It is well worth following.

*          *          *          *          *

Pensions are sitting on a global time bomb, warns WEF. Reading time 3 minutes. The Telegraph, May 26, 2017.

Comment: This Telegraph article reports on World Economic Forum (WEF) pension analysis that suggests eight countries - Australia, Canada, China, India, Japan, Netherlands, the United Kingdom and the United States - collectively had a "retirement savings gap" of U.S.$67 trillion (with a "t") in 2015 that will grow to as much as $428 trillion by 2050 "unless policymakers take urgent action". The article does not report on what urgent action(s) might be available to policymakers.

Thirty-five (now thirty-three) years is a very long time in the lives of business owners. For the time being all this WEF analysis does is once again emphasis long-term risks all businesses will face - many of which, pensions being one, are largely beyond the control of business owners.

For now, just information. At future dates, presumably more than just information.

*          *          *          *          *

The debt spending binge: Household debt has surpassed record levels reached during 2008 Great Recession. Reading time 2 minutes. My Budget 360, May 3, 2017.

Comment: This article reports that U.S. household housing debt and non-housing debt are in aggregate currently identical in amount to what they were in 2008. However, the mix has shifted to less housing debt and more non-housing debt. The latter is shown in large part to be driven by increased automobile and student loan debt.

This is something to think about where main-street America may not be doing quite so well as the U.S. Government and Federal Reserve would like us all to believe. 
Financial Markets News

Ford's ousted CEO told us he was thinking long term - Wall Street couldn't wait. Reading time 2 minutes, thinking time  longer. Business Insider, May 22, 2017.

Comment: Mark Fields lost his CEO position at Ford recently. His claim as to at least one reason "why" is found in the title to this article. Whether he is right or not one needs to think about "immediacy" in the context of the public equity markets. One also needs to consider just how big the gap is between private and public companies in the context "long-term strategizing" versus meeting short-term equity markets expectations.

Old sayings are old saying because they have stood the test of time. One old saying that comes to mind is "short term gain for long-term pain". If the investment banks were "too big to fail" in 2008, they presumably currently are even more so. 
Newsletter Contributors
Ian R. Campbell is the principal contributor to this Newsletter. He has given business valuation and transition advice to both public and private company owners for over 40 years. Other contributors are experts in business transition or specific disciplines relevant to business transition and valuation. They take part in Q&A sessions posted on
Newsletter content ('Content') does not constitute individualized business transition, valuation, economic or investment advice. The ideas, views and opinions expressed in the Content are solely those of the authors/contributors. Provided 'as is', Content may change without prior notice, may be incomplete, inexact, incorrect or jurisdictionally specific. It is used at the reader's own risk.