5 Key Factor which can Make or Break an M & A

 

When it comes to customer experience the bigger may not be a better idea, there could be merger between two big airline companies, the profitability could be high for brief period, but one thing constantly which companies need to address in a customer friendly environment is the people, numerous issues could cost more than even buying the gas to fly the airplanes!

An accountable leader and a dynamic working style is a key to the success of the Mergers, as statistics show more than 80 % of the M & A do not give the positive result which was expected. The major reasons could be the over pushing of the debts from one company to the other, the people’s mindset to work in a similar fashion and not adapt to the culture of the newly merged corporation or various other reasons.

Make or Break an M & A

  1. Communication is the vital aspect when it comes to addressing organizational issues, the vision should be clear and there should be an open and transparent communicative way for all to understand what they as a company have become now. Many times the difference is not clearly understood by the people in the organization and rumor mills start spreading which could damage the image of the newly merged company. Open dialogues, people engagement, the impact and effects of such M & A should be clearly addressed in a manner which they understand, and the people should be one with the thinking of the company’s goal and vision to avoid unhappy and confused work culture and employees
  2. Change is inevitable, having a detailed management change plan is a better way to understand the newer responsibilities and the reporting hierarchy in organizations and new behaviors and way of working can be synced in, taking baby steps and not jumping up the companies hierarchy and resist changes which are futile and will lead to more confusion
  3. Have a detailed process when there are conflicts of how to get the work done or there are different approaches adopted by employees, have a standard workflow for all the new lines of businesses added in to have a streamlined way of getting things done in an easy and simple way without deviating from the standards
  4. Continuous improvements, constant evaluation is a key to measure the extent to which the M & A is successful, high performance is achieved by continuous monitoring, evaluating at every checkpoint and correct where ever there is a lapse in terms of quality and metrics.
  5. Leaders are effective only if they guide their employees well, give the employees the recognition, motivate them for a higher performance and reward them on a continuous basis to gain their confidence and loy1alty for the company, leaders should not just manage the show but have a good interaction at grass root level to understand employees issues and resolve them.

Pros and Cons of Arbitrage

The Act of arbitrage is only that of trading in the asset with no gain in the knowledge in the mispricing of the costs; the transportation, storage and other costs being included by the arbitrageur calculation. The pecuniary attractiveness in the opportunities is quick which lose their sheen if not acted upon, as they are termed to be out of the market and marginal holdings of the buyer cannot be arbitraged further.

While profits are earned in this way of trading, there is another side of losing it all out which us impending which is evident if an arbitrage opportunity is lost, with the expectation of gaining in the future, which again could be an uncertain loss. Thus since the window opportunity could be very short one has to act promptly else the situation will be speculative.

Pros

  • the arbitrageur has to acknowledge the risk associated which could be almost nil, with the arbitrage and losing out on the opportunity as every transaction is timed and then it just disappears without a chance to wait and re-trade
  • it helps in pricing the securities across the markets more or less and thus negate the pricing variances as a better price is discovered with every strategy used with an end to all pricing variances in various markets
  • The financial markets become more efficient as if there were no arbitration selling then the stocks would be sold and bought at different pricing in different markets with speculation done by few individuals who otherwise would have destroyed investor’s confidence in the trading stock markets.

Cons

  • there is more than the pricing cost in the arbitrage transactions, there is no such consideration for the taxes, transactional costs in the buying and selling of the assets, hence there is an incorrect estimation on the profits and thus could reduce the pricing differentiation
  • since arbitrage opportunities are not many lots of innovative technology has to be used to get the correct exposure quickly and trade effectively which has to be done only if one has expertise in the field
  • The amount of money involved in arbitrage is huge and thus refrains many to get into such risk minimizing solutions and make a profitable arbitrageur.

Since everything depends on how successful the strategy is, taking advantage of the price difference between two different markets, the risk is reduced to a great extent on the similar trading securities.

 

 

 

 

 

Financial Concepts for a New Business

The success of small business involves the how well the basic financial ethics and concepts are grasped and practically used in the business, as understanding the broad spectrum knowledge the financial domain has is the most favorable way to apply them into the new business and gain success in any new venture.

Cash Flow

In simple terms the amount of cash coming into the business, against the number of expenses incurred to run the business gives the difference between them, the higher the revenue coming into the business, as against the expenses gives a healthy financial position of cash in the business, and the lower the revenue earned the high amount of expenses indicate an unhealthy cash flow which has to be looked into, the ratio can be calculated after incurring all the expenses for the month in actual and then calculating the ratio

Risk 

Risk and reward go hand in hand, those who are willing to take calculated risk with a good existing line of business are bound to find success in every venture they handle, since there is some amount of certainty and credibility which the business would have it can think of growing vertically or horizontally like adding a new product or moving into a bigger work facility.

  • Understanding whether Equity or Debt way of financing the business is viable, in case of debt financing, which has to be repaid like a bank loan, equity financing is for people who may have to relinquish a part of their business to others, or investors have a right in the business as they fund in the capital requirements for the business.
  • Matching the opportunity cost with the newly expanded area of operation and the sales revenue generated from this additional unit is how the opportunity cost gets added into the business financing, if the revenue from the additional value add is more than the cost incurred it is a profit for the business after considering the debt to be repaid, if the cost is more than the additional revenue earned then the option has to be closely monitored.

The above are essential business finance concepts which are important for business owners to completely understand and run the business profitably, there is an increasing number of entrepreneurs who are taking a financial literacy test to improve their knowledge to current and understand the in-depth concepts which emerge from the balance sheet of a company.

 

Raise Funds for your Business:

We earn to meet our commitments and to save something at the end of the day. The savings that we do is always for a reason, to either save for our children education in the future or for our retirement age. But, sometimes the work income is not enough to live the life that we want to, with growing expenses.

Business sometimes helps you in gaining an extra income; in fact, it will allow you to earn more than you got earlier. Be it’s your long-done habit, like baking, sewing, designing; you can start your business anytime and create your own income, work at flexible hours and become stable in your financial journey and reach the goal.

Wondering you doesn’t have enough money to start your business? Well, we have got friends, who do help in giving some financial support when we require but getting solely from one group will not be possible all times. So here is how you get your business going, without any hassle and worry about the finances.

Partners:

Get someone who is also interested in the same field as you. Team up with people who share your interests, and also someone who can fund in for you. You add the few of bucks you have, let your partner give in some and both start the venture. Sharing is always good and allows you to split the responsibilities and gives an extra hand to cater. But, team up with the person who shares passion and determination just as you, in the chosen field; else you will end up with differences of opinion and a riff in your business.

Crowdfunding or Microfinancing:

This is the trendiest way of sourcing money from potential investors. This is one of the best ways to get small amounts of investments from many lenders, in return for either a service or money with some interest, for a fixed time. This is now getting popular across nations as its helping both the parties.

Cost cutting:

This is one of the best methods known so far, relying on one’s potential and saving as much as possible. When we have a business in mind, we need to start saving for it and do some trial runs beforehand, before plunging into the business just like that. So start cutting on costs, which might not be necessary like, overheads and other unnecessary expenses.

Top 5 ways to Finance your New Business

Financing your new business in this challenging business environment needs a great deal of business proposition, workflow, profit-making capacity and majorly the fund flow for the newly established corporation, or capital to expand a relatively new business. The most common and the approachable way are given a passé nowadays and people are resorting to better and shorter ways to fill in their funding positions.

Depending on the size of the requirement there are 5 ways to finance the business with fewer hassles and get a quick turnaround:

  1. Microloans-if the business is more like operating from home and a small business, banks may not provide the loans, obtaining a microloan for small establishments as low as $500 to $ 35,000 is usually a lendable amounts microlenders who are less with the amount of paperwork which traditional banks require and have a flexible underwriting concept.
  2. Angel Investor-with a competitive assessment, good marketing and sales plan, and expert knowledge on the product to be sold by your business, angel investors are keen but need credible information and authentic information on the business plan, keeping them abreast with major breakthrough in the business keeps them in your confidence and have interest in your business
  3. Securing a SBA Loan is another viable option for financing the new venture is a much sought after lending mechanism resorted to by small entrepreneurs, as they are guaranteed by the government, they can be applied for through banks as commercial loans, with stringent conditions placed by banks as SBA cannot directly give loans, will have to get the commercial banks approval.
  4. 401 (k) – Using the amount accumulated in this account is advisable only if the business plan is a hit and you can see the profits coming in, since it is the fund kept aside for retirement one has to roll back the retirement assets and plan well before taking form this fund which is legally complex, with some expert help it can be obtained, without paying any penalty for withdrawing for a new venture.
  5. Pledging future earnings which can be another way to fund in the new business for the short-term capital requirement is actually a betting on your future earnings like swapping 5 % of your earnings in future for $500,000 which is more like a personal enforcement contract, which is subject to the legality and regulation from the government.

Pursuing any of the above ways for funding the business for a short term are alternate ways apart from considering a bank loan, hence a major part depends on how well the business starts seeing the profit within a short span of time.

 

 

All About Mergers You Need To Know

A Merger is often presented as a strategic tool in the corporate hands that finds its use in achieving efficiency by effective use of synergies. When a company combines with another, the share keepers of the transferor company obtains the major portions of the merged company as per the decided exchange ratio.

There are mainly five categories of mergers

  • Horizontal Mergers: This occurs among two companies that vend similar products to the same market. An attempt is made to create the more effective scale of economies.
  • Vertical type: This joins two different companies that come within the same supply chain. A potential buyer-seller relationship is maintained.
  • Market Extension type: This involves the merging of two firms that provide similar products and services and their successful introduction to such markets that lack such services.
  • Product Extension Merger: Conducts merging while selling products into the different niche of the same market.
  • Conglomerate type: This occurs between organizations that sell products to entirely different markets. The key advantage of this type is the diversity in the business portfolio.

Further, this type can be divided into pure and mixed types that have nothing in common and expecting for extending in markets respectively.

The major advantages of the mergers

  • It is cash-free kind of transaction and is totally free of tax payment for both the companies.
  • It gives a chance of realization for the smaller company, the potential benefits, and appreciation of being in the merged unit.
  • Moreover, the shareholders of smaller entities are offered a worth bigger pie of shares.
  • Merging of a private company to public one allows sharing and holding of public stock shares.
  • It effectively avoids the expensive and lengthy aspects of asset purchase for the acquirer.

Steps involved in merging

  1. An application of merging should be presented to the court by both the involved companies on part of compromise and planning.
  2. The court orders a direction after analyzing the working and reasonable perspectives of arrangement schemes.
  3. The court further issues a notice in respect to compromise and arrangement that contains the Terms and materialistic interest of board managers and debenture trustees.
  4. The fourth stage includes the quality uplift of the presented scheme by the members based on voting.
  5. A further step is about the court satisfaction and sanctioning of the bonafide scheme.
  6. And finally, the filing of the court order with the registrar.

The main reasons for merging may be considered as a case of

  • industry consolidation,
  • a factor for an uplifting position,
  • a kind of defensive move,
  • with respect to synergies,
  • the powerful entry to a market
  • Or to access unique skills and resources.

 

CSR – Economy + Society+ Ecology

Corporate Social Responsibility is essential for all types of companies irrespective of the type of business they are into. At the core, it is the responsibility a company or a firm take on the society keeping in mind the impact and effects of their decisions and activities in benefitting the customers through their products and services. No where, it is not just the action of donating money for a social cause, raising funds for a good cause or conducting camps but about how a company contributes to the welfare and health of the customers in the society by making their operation ethical, legal and transparent. Now this is something not possible and not followed by all the companies for this has become a commercial era wherein companies and businessmen try and concentrate more on earning and making money to the maximum possible.

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CSR – a valuable addition to the society and the company

It is the age of money making process and commercialization where companies and people have completely forgotten their responsibilities and duties in serving the society and not harming them; instead, they only try to make the maximum benefits for them forgetting the fact that they are harming and disturbing the calm and silent ecology around them.

When a company is believed and known to be following this concept, it automatically and unknowingly tries to bring in any more benefits and advantages to it as well as the society as a whole.

  • The best in all – the company that implements this CSR in its operations, functioning as well as services would not be able to gain a good name with the customers but would also be able to get some new customers increasing the list of its clientele. Yes, when a company and its services are harmless, people would prefer their services and this way there would be increased profits and benefits to the company.
  • A CSR company would be able to bring in a great impact not only in the financial status of its company by improving its profitability but would also be able to enhance its appearance and name in the society by making an effort to support nature and the environment the customers are in. They deliberately make it a point to be closer to nature and take all efforts not to disturb the calmness in the living environment. So it is not just the customers who benefit from its products and services but also the nature of having harmless products.