Blog

During a merger or acquisition, there are 4 key steps that must happen to ensure a smooth transition internally, in the media and in the boardrooms of your customers.

STEP 1:

PRE-ANNOUNCEMENT

Develop key messages to be used internally and externally in branding, communications, PR, advertising and social media.

STEP 2:

DAY-1 TACTICAL EXECUTION PLAN

Announce the transaction and be prepared with collateral to address the media, clients, customers and employees.

STEP 3:

THE FIRST 100 DAYS

Open communication to customers and employees is critical. Step 1 is critical in preparing both companies to operate smoothly during this transition.

STEP 4:

DAY 101–1 YEAR POST ACQUISITION

The newly joined companies now function as a fully integrated team. Any lingering divisions between the two sides can result in a failed merger or acquisition.

What is Cross Border M&A?

They are basically those transactions wherein the target company and the acquirer company are of different home countries. This deal is such in which the assets and processes of the companies in different countries are combined to form a new legitimate entity.

Driving forces for Cross Border M&A’s

-Globalization of financial markets
-Market pressures and falling demand due to international competition
-Seek new market opportunities since the technology is fast evolving
-Geographical diversification which would result in exploring the assets in other countries
-Increase companies efficiency in producing the goods and services
-Fulfillment of the objective to grow profitably
-Technology share and innovation which reduces costs

Effects of Cross Border M&A

• Capital build up
  Cross border merger and acquisitions contribute in capital accumulation on a long term basis. In order to expand their businesses it not only undertakes investment in plants, buildings and equipment’s but also in the intangible assets such as the technical know-how, skills rather than just the physical part of the capital.
• Employment creation
  Sometimes it is seen that the M&A’s that are undertaken to drive restructuring may lead to downsizing but would lead to employment gains in the long term. The downsizing is sometimes essential for the continued existence of operations. When in the long run the businesses expand and becomes a successful it would create new employment opportunities.
• Technology handover
  When companies across countries come together it sustains positive effects of transfer of technology, sharing of best management skills and practices and investment in intangible assets of the host country. This in turn leads to innovations and has an influence on the operations of the company.

Issues and Challenges

– Political scenario could play a key role in cross border merger and acquisitions, especially for industries which are politically sensitive such as defense, security etc.

– When there are cross border transactions there are cultural issues that arise because of the geographic scope of the deal

Trends in Cross border M&A

More and more companies want to go global as they offer great opportunities which are comparatively cheaper option for companies to build itself internally. Looking at the M&A sentiments around the world it shows that the businesses acquisition emphasis is changing from domestic to cross border transactions because of the various benefits it offers.

Summing It Up

On a whole cross border merger and acquisitions can provide great benefits to companies and also increase its share price but as we saw there are a lot of factors which need to be taken into consideration to avoid any glitches. Most critical factors which separate the successful M&A transactions from the others, who fail, are thorough and planned preparation and commitment of time and other resources.

What is Corporate Finance?

• Business involves decisions which have financial consequences and any decision that involves the use of money is said to be a corporate finance decision.
• Corporate finance is one of the most important part of the finance domain as whether the organization is big or small they raise and deploy capital in order to survive and grow.
• There are various roles that corporate finance plays, which are very interesting and challenging, one of the main roles is that of being a Finance adviser.
• This can comprise helping to manage investments or even suggesting a mergers and acquisitions strategy.

Corporate Finance Principles

• Investment Principle:
  This principle revolves around the simple concept that businesses have resources which need to be allocated in the most efficient way.
• Financing Principle:
  The job here for the corporate financier is to make sure that the business has right amount of capital and the right mix of debt, equity and other financial instruments.
• Dividend Principle:
  So the basic discussion here is that if the excess cash should be left in the business or given away to the investors/owners.

Understanding the concepts

Capital budgeting

Capital budgeting is the process of planning expenditures on assets (fixed assets) whose cash flows are expected to extend beyond one year. Managers study projects and decide which ones to include in the capital budget.
-The “capital” refers to long-term assets.
-The “budget” is a plan which details projected cash inflows and outflows during future period

The value of money

If you have a dollar today, you can earn interest on it and have more that a dollar next year. For example, $100 of today’s money invested for one year and earning 8% interest will be worth $108 after one year.

Cost of capital

• Capital is an essential factor of production, and has a cost. The suppliers of capital require a return on their money.
• The cost of capital is significant for a firm to calculate, as this is the rate of return that must be used when evaluating capital projects.
• The return from the project must be superior than the cost of the project in order for it to be acceptable.

Working capital management

• Working capital management involves the relationship between a firm’s short-term assets and its short-term liabilities.
• The goal of working capital management is to ensure that a firm is able to continue its operations and that it has adequate ability to satisfy both maturing short-term debt and upcoming operational expenses.
• The management of working capital encompasses managing inventories, accounts receivable and payable and cash.

Corporate Finance Career Overview

• Corporate finance professionals are accountable to manage the money of the organization i.e. to know from where to source it, deciding how to spend it to get the maximum returns at the lowest possible risk.
• They seek to find ways to ensure flow of capital, increasing the profitability and decreasing the expenses.
• They have to monitor the other departments on their expenditure and if the company is in a position to take the risk of additional expenditure.
• They explore the best ways to help company expand whether it is through acquisition or investing internally.

An initial public offering, or IPO, is the first sale of stock by a company to the public. A company can raise money by issuing either debt or equity. If the company has never issued equity to the public, it’s known as an IPO. Companies fall into two broad categories: private and public.

Privately held companies have fewer shareholders, usually owner, their family and friends and sometimes venture capitalist and angel investors. The public is not able to invest in private companies. Private companies have benefits of not having to disclose much information about the company. It usually isn’t possible to buy shares in a private company. Public companies offered some part of their business to the public and trade on stock exchange so initial public offering is often called “going public”. On the other side public companies can have thousands of shareholders and are subjected to rules and regulations. Public companies in United States must report to SEC and produce quarterly and annually reports. They also have to adhere to regulations and requirements set by stock exchanges on which they are listed.

Why go public? Going public is mostly used to raise cash and a lots of it. With initial public offering you can raise the largest sum of money compared to other methods of going public. Because increased supervision public companies usually get better rates when they are issuing debt.  As long as there is market demand, a public company can always issue more stock. Thus, mergers and acquisitions are easier to do because stock can be issued as part of the deal. Trading in the open market means liquidity. This makes it possible to implement things like employee stock ownership plans, which help to attract top talent. Being on a major stock exchange carries a considerable amount of prestige. You can always raise more cash with second offering.

An initial public offering (IPO) is the first time that the stock of a private company is offered to the public. IPOs are often issued by smaller, younger companies seeking capital to expand, but they can also be done by large privately owned companies looking to become publicly traded. In an IPO, the issuer obtains the assistance of an underwriting firm, which helps determine what type of security to issue, the best offering price, the amount of shares to be issued and the time to bring it to market.

When a company starts an IPO process a specific set of event occur.The chosen underwriters facilitate all of these steps.

• An external IPO team is formed, consisting of an underwriter, lawyers, certified public accountants (CPAs) and Securities and Exchange Commission (SEC) experts.

• Information regarding the company is compiled, including financial performance and expected future operations. This becomes part of the company prospectus, which is circulated for review.

• The financial statements are submitted for official audit.

• The company files its prospectus with the SEC and sets a date for the offering.

Reverse takeover is transaction in which public company listed on a stock exchange in Canada with few or without assets (often referred as shell company) acquires all securities of a private company with a significant assets and operation. It is considered a less expensive and time consuming alternative to initial public offering (IPO). This way public companies acquires all securities of public company and it becomes direct or indirect wholly-owned subsidiary. Shareholders of the private company receive shares from the public company and the operating company’s shareholders ultimately acquire a controlling interest in the new, combined company.

Shell companies may be created and maintained just for purpose of reverse takeover or it can be existing company, a reporting issuer that have previously ceased operations, but still maintain their reporting issuer status and usually have the shareholders required to list on a stock exchange. This makes them ideal candidates to complete an RTO transaction to take a private company public. The choice of structure used to implement an RTO transaction will depend on number of factors: the business sector in which the private company operates, legal and tax consideration, the number of shareholder and their location, deal process and timing matters. An reverse takeover transaction generally includes negotiations and discussions among parties, due diligence, shareholders meeting, preparation of disclosure documents containing-prospectus level disclosure concerning each of the companies and prescribed financial statement, review of and changes to corporate governance governance structures and policies to ensure that securities law and stock exchange requirements are met, review of transactions and related disclosure documents.  Securities held by officers, directors and other insiders will be subject to the escrow policies of the relevant stock exchange.

If you are interested in going public and you currently meet NEO’s or CSE’s requirements or will meet them following a public offering, we encourage you to contact us and we can assist in completing the listing application form. The listing application and the required due diligence can be done concurrently during the process of become a reporting issuer in Canada.

MinaMarGroup.com
investorrelations.mmg@gmail.com

#MinaMarGroup #MMG #MiroZecevic #reversetakeover #RTO #business #company #corporate #Canada #publiccompany #publicshell #IPO #consulting #CSE #NEO #reversemerger #stockmarket