Tag Archives | mergers and acquisitions

Hiring an Investment Banker?

investment bankerSince the economic recession that started in 2007, many people have perceived investment bankers negatively. The recession was caused in great part by the careless and unwise actions of investment banks and their regulators. Despite the negative impression people have of investment bankers, they are extremely beneficial for the economy and for individuals and companies to be profitable.

Hiring an Investment Banker?

Many larger firms use an in-house team for handling the issuance and trading of securities. However, there may be a point in the growth stage of your business that you need the external financial services of an investment banker. While there is a cost to investment banking, there are proven benefits of having outside intelligence oversee your company’s finances and securities. Following are the areas where investment bankers can help you:

Access to Capital:

Investment bankers have extensive relationships with investors, who have readily-available capital to invest in your business. Access to the investment bankers’ network of investors is a significant advantage when raising capital to invest in new technology, make strategic purchases or expand business operations. In addition, investment banks provide you with the resources and expertise you need to structure and implement deals to raise capital at profitable price points.

Knowledge about Partnerships, Mergers and Acquisitions: 

Business intelligence is the key to strategic decision-making. Investment bankers usually have extensive industry knowledge that can help you discover new opportunities to expand your business. These strategic opportunities include partnerships, mergers, and acquisitions.

Consultative Services:

Investment bankers make transactions happen for you in the moment. They also use their industry expertise and experience to advise and prepare you to act when advantageous opportunities present themselves in the future.

Working with investment bankers can be the key to your success. The ability of investment bankers to raise capital not only drives your business forward, but also the economy forward. For small businesses without financial investment divisions, hiring an investment banker will allow you to better manage investment decisions. An investment bank can put you in the best position to take advantage of strategic investment opportunities.

Learn how to apply concepts like this in your career with CFO Coaching.  Learn More

Determine which candidates are the right fit for your company using our 5 Guiding Principles For Recruiting a Star-Quality Team.

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Investment Banks

Investment Banks

Investment banks are banks that offer expert financial services. The services include the following:

They also serve as financial intermediaries between companies issuing securities and the investing public that purchases the securities; however, they do not accept deposits or offer loans like commercial banks.

League Tables

League tables rank investment banks according to performance in various categories. For example, the mergers and acquisitions league table would list the top M&A dealmakers according to the deal volume and market share.


It may be time to partner with an investment bank, but if you do not have a relationship with the CEO, then it may be difficult. Before you invest any more time, develop a relationship with your CEO so they see you as a wingman. If you’re interested in becoming the trusted advisor your CEO needs, then download your free How to be a Wingman guide here.

Investment banks

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Investment banks

See Also:
Capital Structure Management
Agency Costs
Mining the Balance Sheet for Working Capital
Inventory to Working Capital
Venture Capitalists Definition
Commercial Bank

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Enterprise Value (EV)

See Also:
EBITDA Definition
EBITDA Valuation
Adjusted Present Value (APV) Method of Valuation
Company Valuation Introduction
Valuation Methods

Enterprise Value (EV) Definition

Enterprise Value is simply the total market value of the firm which includes the value of all equity holders as well as debt holders. The EV method is often considered a better measurement for Merger and Acquisition (M&A) activity than most other valuations.

Enterprise Value (EV) Meaning

The enterprise value is a great measure for the total value of a firm and is often a great starting point for negotiations for a business. This is because the EV takes into account the debt holders which should be part of an acquisition price as the acquiring firm will be purchasing the amount of debt as well as equity. The valuation often takes place by using the formula below or by finding the EBITDA of the target and discounting it back at the WACC. The value is then derived by using some multiple or a perpetuity method may be better if a long term growth rate can be determined for the company.

Enterprise Value (EV) Formula

The EV formula is as follows:

EV = Common and Preferred Equity at MV + All Debt Obligations + Non-Controlling InterestCash

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Due Diligence

See Also:
Due Diligence on Lenders
Auditor
Mergers and Acquisitions (M&A)
Audit Committee
Loan Agreement

Due Diligence Definition

The Due Diligence definition is an extensive qualitative and quantitative look at a company. It helps company leaders make the best informed business decision about a company. Furthermore, Due Diligence is often associated with audits, where it is required before a public offering. In addition, it is associated with mergers and acquisitions to reduce the risk in the market for these activities.

Due Diligence Meaning

Due Diligence often becomes necessary when a large transaction is about to take place like a merger or loan agreement, or when the company’s financials are going to be presented to the public. Oftentimes, due diligence requires the assessment to be both qualitatively as well as quantitatively.

Qualitative Due Diligence

A qualitative act of due diligence may be to assess the mental state and capability of the management. This can be done through the following:

Quantitative Due Diligence

In comparison, quantitative due diligence includes thorough investigations of the books and records. This can range from asset appraisals to day to day transactions. A thorough understanding of internal controls and its effectiveness also become necessary to ensure the risk for the business is as low as possible.

If you don’t want to leave any value on the table, then download the Top 10 Destroyers of Value whitepaper.

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Accretion

See Also:
Depreciation
Asset Market Value vs Asset Book Value
Fixed Asset Turnover Analysis
Research and Development
Straight-Line Depreciation

Accretion Definition

Accretion is the increase through time of a natural asset like land or a financial asset. The increases occur through growth and multiplication like through the following:

Meaning

Businesses often use this type of accounting for the development of assets in the form of an accretion expense, or an increase in the present value as the asset draws closer to its final future value. It is also used in Mergers and Acquisitions (M&A) when discussing the earnings per share for the company using pro forma statements after the transaction takes place. In other words, these accounts for the synergies which are likely to be realized. In addition, it will feed directly into the combined entity’s bottom line. Accretion real estate is simply the development of land through the growth and development of land. This can be through the development of a shopping center or something simple like the growth of livestock through breeding.

accretion

 

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The Power of Connections

AmandaStibbsco.

Laura Koch (SCFO) and Courtney Sheaffer (Stibbs & Co.)

We had a great time catching up with our friends at Stibbs & Co. at lunch last week. The power of connections is huge, and it is amazing how many ways you can help one another. Just by having a quick lunch, Courtney Sheaffer and I reconnected and shared connections that might help the other. In business, reconnecting periodically is more than building a personal relationship. It strengthens business ties and helps keep the other in mind while meeting new people. After all, word of mouth is still one of the strongest ways to meet people who are great at what they do.

I would like to introduce my network to one of Stibbs & Co.’s new attorneys, Courtney Sheaffer (pictured above on the right).  Even though we are in different industries, we both benefit greatly from our relationship. I can recommend her and Stibbs & Co. for the following:

The Power of Connections

Remember to keep in mind the importance of building your trusted network of people from other occupations. As your network grows, you can cross-connect and refer individuals that you have a strong relationship with. It was a past client that reconnected Courtney and I, so I wanted to bring this up to our Strategic CFO community!

Need guidance in networking? Download your free Networking for Introverts guide and start building your network today.

the power of connections

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Access your Projections Execution Plan in SCFO Lab. The step-by-step plan to get ahead of your cash flow.

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