21 Dec 10 The Real Purpose of Corporate Finance
Those of us in corporate finance and venture capital can easily forget what we are there for.
We can easily see that it does not matter how the money is raised; there must be a fair exchange for the team, for the technology, and for the money.
The real goal of corporate finance is to see that the company has more than enough money to achieve its goals.
Now that we say it, we know it could not be anything else. What else could it be?
In seeing this, we know immediately what venture capital is not.
Real venture capital does not deprive the company of funds so it can be bought for a song later on, taking the work of the team for little or nothing.
Venture capital is not loading the entrepreneurial team down with straightjacket agreements.
It is not setting a cheap value on the company so you can make a huge gain out of a share of the company that should belong to the people that daily contribute their sweat.
True capital would not keep control of the company to wrest control from those executives who know best how to manage. Capital is not there to know better than management. Management, not capital, is on the firing line and best knows how to achieve the goals of the company.
True corporate finance is seeing that the company has more money than it needs. True venture capital motivates and encourages the team. True venture capital values the team and acts accordingly. True venture capital is part of the team.
True venture capital is more than capital. It is a partnership of equals; it is support that is more than financial; it is part of the team that fights its way forward through the perils and battles that are business.
Only true venture capital is entitled to share in the rewards of the team.
When a company is adequately financed, the entrepreneurs and their team are not deprived of enough pay to support themselves and their families. They are well rewarded for their work by industry standards. They are not paid little or nothing so the investors can live high.
When a company is adequately financed, it has enough reserves to give it confidence to face any contingency.
When a company is adequately financed, it has the money to acquire the resources it needs to win in a competitive marketplace.
Real finance gives these things to the company.
The real goal of any venture capital is to see that the company has more than enough money to achieve its goals.
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06 Dec 10 A Corporate Finance Primer
Corporate finance can be complicated. It deals with using financial tools to increase the corporate value of the company and decrease any risks associated with the company, such as credit, liquidity, and operational risks. Credit risk refers to the risk of a borrower not paying back debt. Liquidity is the ability to change an asset into cash. The quicker the asset can be converted into cash, the more liquid it is. The risk involved with liquidity is the risk that a given asset cannot be converted into cash fast enough to bring a profit, or prevent a loss. Operational risk deals with the risk inherent in a company’s operations. This is a bit broader than the other types of risk. Operational risk includes fraud and other illegal practices.
When a public company makes a profit, they distribute dividends to their shareholder. Shareholders are investors in the company. Dividends are simply the portion of the company’s profit that is paid out to the shareholders of that company’s stock. Dividends can take a variety of forms including cash payments, stock dividends (additional shares of stock), or property dividends. Property dividends can be assets such as securities, as well as products and services. In the past, they have even involved acreage of land. Sometimes a company will re-invest the dividends in itself. This is what makes up part of the retained earnings of the company.
Occasionally, an individual or a company will want to buy another company. There are different ways to accomplish this. One way is an acquisition. The acquisition, also known as a takeover or buyout, involves the purchaser of the company buying the target company. Two types of this are MBO (Management Buyout) and MBI (Management Buy-In). MBOs occur when the management already in the company acquires a large part, or all, of the company. The opposite of this is the MBI, which happens when n individual or group of individuals from outside the company buys the company and instills themselves as the new management of the purchased company.
Another form of acquisition is known as consolidation, or the merger. A merger occurs when two similar sized companies join together to form a completely new company. A friendly merger is one in which both companies are negotiating the terms of the merger. In contrast, a hostile merger is one in which one company does not wish to join another, or the board of the company does not know prior to the offer about the merger.
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08 Nov 10 Mergers & Acquisitions in Corporate Finance
Although the terms often used interchangeably and are very similar in nature, business mergers and acquisitions are "something different. The term" mergers and acquisitions "is actually the official abbreviation is fixed, M & A. It is often both in terms of consolidation. The main goal for both is to extend the rule and to increase business.
The merger is when two companies move to integrate the often relatively equal, and agree together assingle new company rather than remain separately owned and operated. Mergers occur not as often as acquisitions.
An acquisition (even as a takeover or buyout known), the purchase of a company and control over them. The sale may friendly or hostile, and public or private.
We often hear the terms mergers and acquisitions, the industry when it comes to corporate finance. This activity relates to the company's Corporate FinanceIndustry again with the sale, purchase, or a combination of several companies. This is normally done to fund companies for financial aid and growth in a fast and avoids the need to create a whole new field of business units. Banks are particularly well-known that the exercise of this activity, and there is a long history of it in time. It is not uncommon for the bank's name changes frequently due to mergers or acquisitions to hear. It happens often enough that it is sometimes difficult to maintainwith.
Banks are usually purchased by other financial institutions, but can also be from individuals or groups with the intent to control and prevent acquired a brand new start. There are many examples of large mergers and acquisitions that took place in Britain in the past. One example is in 2004 in Abbey National, the sixth largest bank in the UK, a takeover bid of $ 15.5 billion from Banco Santander, the largest Spanish bank, agreed.
Asotherwise there are advantages and disadvantages of mergers and acquisitions in the world of corporate finance. A big pro is the possible creation of a very large profit. For a bank in turmoil, the rescue merger with another of the 'only way to get it. A great is a possible negative public reaction to, in the case of a hostile takeover, and the resistance is obtained from the bank of destination. There is also the responsibility of recently added more debt and problems.
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Tags: Acquisitions, Corporate, Finance, Mergers
