INVESTMENT BANKERS ARE NOT VENTURE CAPITALISTS
There is a rather silly notion that–more often than not–stems from ignorance related to private, corporate investments.
That is, nearly all investment funds (private equity, venture capital, family office) and investment bankers fall within the same bucket. News flash: Investment bankers are not venture capitalists OR private equity investors.
Very few middle-market investment banks invest using their own funds. Very few have their own investment vehicles and, when they do, they typically are less inclined toward early-stage venture capital deals. Most private equity funds are interested in risk-sheltered, boring deals in steady-state sectors. Valuations, business models and investor types are all differentiating factors between investment bankers and venture capitalists. Here we will discuss some of these in more detail.
For More Information on Investment Banking Services , Stay tuned with AlcorMNA!
BUSINESS VALUATIONS
There is a difference between a venture capital valuation and a valuation for M&A. One often bases assumption on forward-looking potential, while the other uses historical performance. VCs use pre and post-money as the basis for the “valuation” while the other looks at some multiple of the historical cash-flows, typically based on industry comparables. Both play the diversification game very differently and therefore treat business valuations very differently as well.
Venture capitalists want the lowest valuation with the lowest amount of capital infused for the associated risk–except in cases when they need to place funds and they have the opportunity to feed a unicorn.
Investment bankers are apt to push for the greatest amount of capital input and the highest valuations possible. Their commissions move in-step with both of those metrics. In fact, when investment bankers do work with venture capitalists on behalf of a client, they are typically at odds with them. There are some venture capital firms that refuse to pay the fees of intermediaries. It’s a picky mentality, that is not exclusively the curse of venture capitalists, but had among private equity firms as well.
ADVISING IS NOT INVESTING
In the valuation differences discussion above, we are speaking as though the investment bank itself directly invests in deals. While many investment banks have their own investing funds, most in the middle-market investment banking firms do not directly invest. They are typically the connecting link between buyers/investors and the issuers/sellers. They advise clients on the nuances of capital transactions (e.g. buy-side M&A, sell-side M&A and debt/equity capital infusions). They are not fiduciaries of investor funds. They do not have a investment “thesis” or “mandate.” Most are brokers and intermediaries, advising clients on their own transaction(s) with capital sources, they are not investors themselves.
Bulge-bracket banks differ here, but the general advise or invest rule holds true for most in the mid-market.
Are you looking for a Corporate Finance? Complete the Enquiry Form!
APPLYING FILTERS
Fewer investment bankers work with startups than do venture capitalists. Most bankers like to see substantial revenues (again, the bigger, the better). Why? This is how investment bankers ensure they are able to truly take both front-end and back-end fees for the work they do. That’s not to say investment bankers are more picky than venture capitalists. Both rightly apply stringent filters on potential deals. They simply have different filters to keep out the riff-raff. As you might imagine, we receive an inordinate number of capital raise requests. So many, in fact, that I have automation email chains set up using appropriate tags as the trigger in our marketing automation and CRM system. The tag I regularly use is #RaiseCapital.
Both investment bankers and venture capitalists will put off phone calls, NDAs and “presentations” from companies until they know whether or not there is real meat on the bone or potential proof in the pudding. Such filters should be expected. If a company is unwilling to jump through the hoops, then they become one of the many self-filtered deals.
WHAT WE ARE AND WHAT WE ARE NOT
Investment bankers are advisors, intermediaries and brokers. They are rarely active direct investors, venture capitalists, private equity investors. If an investment bank invests directly, they typical do so through investment vehicles run by separate teams than those who manage the processes of their capital transactions.
The perfect example of “what not to do” comes from a request we had this week. The message included name, email, phone and location with the following text: “Need a loan.”
In the regulated financial services world, investment bankers are required to following “Know Your Customer” or KYC rules, so as not to provide investing advice to products unsuited for various investor types. While I would not assume the same scrutiny would be applied to company issuers looking to transact in some way, it would be very helpful if issuers applied some form of “Know Your Investor” principals to their outreach.
The more you know, the less you will look foolish and the more likely you will be to get a deal done with the right investor group. In fact, that’s the reason most companies hire an investment banker in the first place.
About ALCOR Mergers and Acquisitions
Alcor M&A is a leading advisory firm providing financial services with an emphasis on customized solutions in the areas of Investment Banking, Corporate Financing, M&A advisory, Joint Venture Advisory, Private Equity, Debt Financing and International Business Development. These Services leverages insights, relationships and a culture that emphasizes a strong orientation towards excellence.
For additional information on how ALCOR MNA can help you Grow your Company, Complete the Enquiry form One of our representatives will contact you within one business day.
ALCORs Growth Solutions for Business Helps Corporate Companies in the Areas of Investment Banking, M&A, Private Equity and Corporate Finance.
ALCOR provides a one-stop solution in Investment Banking with world-class corporations and companies as its clientele. ALCOR expertise spans the spectrum of finance - Mergers & Acquisitions, Equity Financing, Debt Financing, ECB, Financial restructuring, and investment banking advisory. ALCOR has footprints across the globe and an extensive presence in India with over 48 regional offices. ALCOR serves a wide cross section of verticals, some of which are the following: Automotive, Power, Telecom, Electronics, Software, Real Estate, and Education.
For More Information on Our Services, Stay tuned with AlcorMNA!
True to its global stature as a leader, ALCOR's business philosophy is driven by highest levels of integrity and honesty at the heart of business. ALCOR obeys and complies with the rules of the land . ALCOR’s erudite Directors are from Harvard, Oxford and other prestigious institutions. The execution Team comprises of internationally reputed and highly experienced finance personnel.
ALCOR leverages its strong global footprint and the value of its international board of advisors to provide its clients with high growth transactions across the globe. We use our international deal-making experience to deliver customized advice to clients on each transaction. We assist clients in evaluating international and domestic Acquisitions and Joint Ventures. Global Fortune 500 companies work with ALCOR to assess suitable targets across the globe for market entry or market share expansion. ALCOR solutions include Mergers & Acquisitions, sell side, & buy side advisory, leveraged buyouts & other types of corporate restructuring. Standing aloft with over a 100 man-years in cross-border M&A advisory & independent research & experience, ALCOR, delivers maximum value from their transactions. ALCOR understands the clients' unique business needs, keeping their objectives a top priority. We work with our clients closely, often over five years, to help the client realize the value of their value creation strategy. ALCOR's wide range of product offerings are tailor made to suit client growth requirements
Are you looking for a Corporate Finance? Complete the Enquiry Form!
ALCOR worldwide team allows for targeted search, scenario mapping, synergy realization, and detailed road map with experience-driven cross-border M&A advisory that can be customized with minority buy-in, acquisitions, or even a 50:50 joint venture.
ALCOR uses strategic tools such as the Balanced Scorecard with tailored precision to define the following -
- Core defense
- Global customer revenue model
- Strategic high growth market entry.
- 360-degree growth model
- Intangible value proposition .Core foundation pillars
- Evolved value chain integration .Low cost global value partnerships and several other strategies.
About ALCOR Mergers and Acquisitions
Alcor M&A is a leading advisory firm providing financial services with an emphasis on customized solutions in the areas of M&A advisory, Joint Venture Advisory, Financial Advisory, Private Equity, Debt Financing and International Business Development. These services leverages insights, relationships and a culture that emphasizes a strong orientation towards excellence.
For additional information on how ALCOR MNA can help you Grow your Company, Complete the Enquiry form One of our representatives will contact you within one business day.
www.alcormna.com
Technology companies leverage M&A for innovation and growth
Technology, Media and Telecommunications companies find themselves in a period of rapid change, as digital and new technologies shift borders and transform whole industries. New analysis shows technology firms are increasingly interested in acquiring companies, in a bid to grow, access innovation, and expand into new segments. While merger and acquisition activity has been in a state of flux in recent months, technology investment remains one of the world’s fastest growing sectors, driven by innovation and disruption. The industry, has, in recent years, sought to leverage strategic mergers and acquisitions to acquire access to broader tools, as well as users’ data, among others. Facebook’s acquisition of WhatsApp for instance, or Apple’s acquisition of Shazam are examples of such strategic moves.
The industry remains well endowed with cash, while growing disruption in the Fintech space means that tech companies continue to eye ways of competing across traditional borders – with acquisitions of start-ups being a popular investment route. In terms of confidence the rapid growth of tech industry, market capitalisation is reflected across key indicators. Respondents’ level of confidence at their sector level for corporate earnings hit 71% in the latest survey, a massive 70 percentage point increase from the same period last year. Credit availability increased significantly too, while short term market stability was cited by 68% of respondents as improving. The industry is well positioned in terms of equity valuations / stock market outlook, cited by 46% as improving and 51% as stable.The current strong position of tech industry respondents places them in a comfortable position to consolidate, expand and access key technologies and talent – through M&A. The number of respondents that expect to pursue M&A over the coming 12 months stood at 57% in the tech industry, a seven-percentage point increase on the previous year and well above the 33% recorded in October 2013.
Are you looking for a Corporate Finance? Complete the Enquiry Form!
The tech industry has also increased its acquisition appetite to that of the wider global industry, after considerable divergence between October 2015 and April 2017. The firm notes, however, that while intentions were relatively subdued for the 2015-16 period, actual deal activity was – like much of the wider industry – booming. This year will likely see deal volume decrease by 9% and deal value by 34%.The key drivers cited by the tech firms surveyed reflect wider trends in the strategic M&A space. The top cited reasons include acquiring innovation (24%) and growing market share (also 24%). Access to new geographies and additional talent follow, at 18% and 16% of respondents respectively. Reactions to changes in customer behaviour and securing supply follow, at 14% and 4% respectively. Commenting on the sector’s M&A appetite, the authors stated, “The question of how much of today’s tech sector optimism translates into tomorrow’s done deals will be answered in 2018. Tech companies can work to realise their deal making intentions by taking deliberate steps indicated in these pages: re-evaluate their portfolio review process, take advantage of modern analytical tools, prepare for an increasingly competitive M&A market and pre-plan for integration.”
About ALCOR Mergers and Acquisitions
Alcor M&A is a leading advisory firm providing financial services with an emphasis on customized solutions in the areas of M&A advisory, Joint Venture Advisory, Financial Advisory, Private Equity, Debt Financing and International Business Development. These services leverages insights, relationships and a culture that emphasizes a strong orientation towards excellence.
For additional information on how ALCOR MNA can help you Grow your Company, Complete the Enquiry form One of our representatives will contact you within one business day.
Venture Capital Deals Break More Records in Q3 2017
Quarter builds on $48bn in deals announced in Q2 to register an all-time high of $49bn
The venture capital-backed deal industry has registered a second consecutive record-breaking quarter, as 2,362 deals were announced worth a combined $49bn. Expecting these figures to rise by around 5% as more information become available. This follows Q2, which saw 2,512 deals announced worth $48bn, to put total deal activity in the first three quarters of 2017 at $128bn, on course to become an all-time annual high. However, these record values are being recorded by a declining number of transactions, with Q3 representing the sixth consecutive quarterly decline.Q1-Q3 2017 has seen 7,552 venture capital-backed deals announced, compared to 8,792 in the equivalent period of last year.
For More Information on Mergers and Acquisition Advisory, Stay tuned with AlcorMNA!
Key Venture Capital Deals Facts:
- In Q3 2017, there were 2,362 deals made with an aggregate deal value of $49bn. This is the second consecutive quarter to register record high aggregate deal values.
- North America saw the greatest activity in the quarter, with 939 deals announced for an aggregate deal value of $19bn.
- Israel saw the greatest drop in deal activity from the previous quarter. In Q2 2017, Israel made up 34% of aggregate deal value; in Q3, this figure stands at just 1%.
- Series A financings made up 31% of venture capital deals in Q3 2017, while angel investments accounted for a further 26% of deal flow.
- Later stage venture capital deals have increased in value over the past few years. While average series A-C financings in 2017 YTD are smaller than in 2016, Series D and later funding rounds have hit a new record high of $98mn.
- Deals in software account for the greatest proportion of deals (26%), but deals in internet companies account for the largest share of aggregate deal value (26%).
- The largest venture capital deal announced in Q3 was the $2bn financing of Grab Holdings.Funding came from investors including Didi Chuxing, the firm involved in the largest venture capital-backed deal ever recorded.
- The largest venture capital-backed exit announced in Q3 2017 was the CNY 9.5bn sale of China-based Mango TV to Happigo.
Are you looking for a Financing Options? Complete the Enquiry Form!
2017 now seems assured to set new records for venture capital-backed deal activity, as the industry has witnessed its second consecutive record-breaking quarter. Driven by the rising number of late-stage multi-billion dollar financings – eight in Q3 alone – the industry is setting new records with increasing regularity. Increased opportunities in emerging markets and increased appetite from investors are combining to propel the venture capital industry to new heights.
The bulk of deal activity remains focused on the earlier part of the funding cycle, with angel and series A investments accounting for almost half of total deal numbers. However, deal values are increasingly being driven by large late stage financings and debt issuances. In fact, while the average value of financings up to series C have all fallen in 2017, average series D deals are at a record high, while the average venture debt issuance is more than twice as large as it was in 2015.
Source - preqin
About ALCOR Mergers and Acquisitions
Alcor M&A is a leading advisory firm providing financial services with an emphasis on customized solutions in the areas of M&A advisory, Joint Venture Advisory, Financial Advisory, Private Equity, Debt Financing and International Business Development. These services leverages insights, relationships and a culture that emphasizes a strong orientation towards excellence.
For additional information on how ALCOR MNA can help you Grow your Company, Complete the Enquiry form One of our representatives will contact you within one business day.
6 Ways to Improve Your Company’s Working Capital
Working capital symbolizes the cash your organization has to meet its everyday expenses of business venture. It is the amount of money in your organization’s pocket. Successfully administration of working capital is vital to make sure your business venture might meet its compulsions as well as avoid bankruptcy. Working capital is computed from current assets by deducting current liabilities. For ensuring your organization has enough cash for meeting its everyday financial obligations and for funding simple operations of business venture, you must effectively and efficiently manage your working capital. Smaller amount of working capital might lead to bankruptcy; on the other hand large amount of working capital might lead to reduced profits as well as shareholder value.
For More Information on Financial Services, Stay tuned with AlcorMNA!
Methods to Improve Working Capital
You can get better working capital by taking it closer to ideal ratio of 2:1 as possible. Below six strategies are described for improving insufficient working capital. In these strategies each one needs that you must analyze no. of areas inside your business venture for finding ways to improve efficiencies and adjust processes for reducing expenses as well as increasing positive cash flow.
Improve Accounts Receivables Collections
Ensure whether your receivable accounts are being gathered timely or not? Encourage consumers to pay on time by proffering quicker payment incentives. Additionally, start motivating your gathered team with various internal programs offering incentives for collecting outstanding invoices in the invoice payment time.
Improve Accounts Payable
Negotiate enhanced payment terms with distributors and materials suppliers or replacing them with newer distributors and suppliers as well as improving management process of payment. On should review the terms of payment on your payable accounts as well as receivable accounts. In the most positive cash flow position, balancing these terms for your organization is the critical thing.
Are you looking for a Financing Options? Complete the Enquiry Form!
Negotiate Better Pricing with Suppliers
You must review all contracts supplier and should negotiate for good pricing whenever there is a possibility. If in case, supplier is not willing in negotiating favorable terms for your organization, then there is a possibility that you require a replacement. And always remember, this business is yours and best position of working capital is required for surviving and thriving.
Reduce Expenses
Keep reviewing your variable as well as fixed costs for determining whether there is a possibility of cash flow improvement. For example, equipment, office supplies, and technology all represent expenditures that might be decreased with new suppliers, negotiations, and so on.
Segment and Analyze for Credit Risk
Examine your consumers and categorized them by their chance for repaying you. This will sure help in reducing collections and improving cash flow on constant basis. You might do this kind of analysis for all your specific distributors.
Review Tax Opportunities
Is your organization taking all tax breaks it may have or its overpaying taxes as well. Moreover, review all present tax codes for ensuring that your organization is always in the best tax position.
About ALCOR Mergers and Acquisitions
Alcor M&A is a leading advisory firm providing financial services with an emphasis on customized solutions in the areas of M&A advisory, Joint Venture Advisory, Financial Advisory, Private Equity, Debt Financing and International Business Development. These Services leverages insights, relationships and a culture that emphasizes a strong orientation towards excellence.
For additional information on how ALCOR MNA can help you Grow your Company,Complete the Enquiry form One of our representatives will contact you within one business day.
M&A Planning and Due Diligence Execution
As with any major asset acquisition, the acquisition of an organization, or just some of the assets in this, needs a major coming up with method. Most firms have an outlined approval method for major expenditures, as well as the outline, business justification, monetary necessities and expected come on Investment (ROI). Mergers and Acquisitions, however, typically appear to fall outside of this basic method. M&A coming up with begins with the event of the business set up that identifies the strategic explanation for a sale of assets or firms. The set up identifies the business purpose, market, size, finance methodology, and ensuing business edges.
Generally, with plus purchases within the traditional course of business, all of the pertinent data is obtainable before the request for approval is ready. By comparison, abundant of the ultimate M&A data isn't offered till when the acquisition method has begun. This data is set through the initial due diligence inquiry requested from the vendor. The M&A skilled typically develops Associate in Nursing initial due diligence listing to solicit data from the potential targets that were known supported the strategic criteria. Several checklists are offered that give specific queries for the industry/market of the vendor that are on the far side the final monetary and publically offered information. The stress is to get adequate data to see the finalists within the search, to make a Letter of Interest to ascertain an initial worth vary if requested. The initial due diligence ought to be comprehensive, however shouldn't be thus thorough that it slows down the choice method.
For More Information on Financial Services, Stay tuned with AlcorMNA!
A system ought to be in situ to permit scrutiny and contrastive the data that the Targets give in response to the Request for data. The client should rigorously valuate the necessity sure essential information, if the seller’s data is incomplete or unclear. The latter could result as a result of theirs seller’s reluctance to disclose data he deems confidential. He can get to be convinced of its essential nature to the client, even though it's during a redacted format. The seller’s estimates on revenue growth, market size, competitive position, and technological benefits ought to even be completely evaluated so as to gage its accuracy. This might need assessing the premises that the vendor employed in developing the estimates. Whereas the client might need to believe the vendor, such estimates ought to be corroborated by the vendor or through a 3rd party references.
The seller ought to be requested to affirm compliance with audited account coverage, tax filings and audits for all relevant jurisdictions, and alternative restrictive necessities. The seller’s title to all or any assets ought to be verified, significantly chartered assets. With correct answers to the Request for data and therefore the follow-up clarification queries, the client ought to have a fairly correct means that for down-selecting the Targets to a listing of finalists. Having a decent set up at the terribly starting and capital punishment thereon is that the opening moves to M&A success.
Are you looking for a Financing Options? Complete the Enquiry Form!
A specialty software package company, through a series of product acquisitions, was ready to expand their customer’s narrowly centered offerings by providing a full suite of promoting software package. These acquisitions additionally allowed the client to enter new end-user market segments, each domestically and internationally. This acquisition provided core competencies outside of the bottom technology and allowed new penetration, whereas denying this market phase to the competition.
Moreover, every acquisition can gift issues and opportunities. The most effective manner for achievement is to possess an outlined acquisition strategy, and exceptionally elaborated due diligence. Reassuring that the acquisition Target meets the outlined necessities is most important. Trailing the infinite due diligence matters is imperative. Utilizing a comprehensive M&A software package application assures that each one of those matters are captured, documented and properly vetted to maximize the likelihood of success. A specialty software company, through a series of product acquisitions, was able to expand their customer’s narrowly focused offerings by providing a full suite of marketing software. These acquisitions also allowed the buyer to enter new end-user market segments, both domestically and internationally. The buyer also acquired a company with similar product offerings, but utilizing a different technology. This acquisition provided core competencies outside of the base technology and allowed new market penetration, while denying this market segment to the competition.
About ALCOR Mergers and Acquisitions
Alcor M&A is a leading advisory firm providing financial services with an emphasis on customized solutions in the areas of M&A advisory, Joint Venture Advisory, Financial Advisory, Private Equity, Debt Financing and International Business Development. These Services leverages insights, relationships and a culture that emphasizes a strong orientation towards excellence.
For additional information on how ALCOR MNA can help you Grow your Company,Complete the Enquiry form One of our representatives will contact you within one business day.
ADVANTAGES OF DEBT FINANCING
Access to capital is one among the most important barriers little businesses face once wanting to implement growth ways. That’s why it’s vital to know each the benefits and downsides of debt finance. A convincing truth in business is that it takes cash to create cash; however, it takes inexpensive cash to last. However, wherever can that cash come back from? There square measure scores of choices. Don’t let the word “debt” scare you. Primarily, debt finance is that the act of raising capital by borrowing cash from a loaner or a bank. Reciprocally for a loan, creditors are then owed interest on the cash borrowed. Debt may be cost-efficient, providing little businesses with the funds to top off on inventory, rent further workers, and buy property or much-needed instrumentation.
Advantages of Debt Financing
You Won’t Give Up Business Ownership
To begin with, one major advantage of debt finance is that you just won’t be dropping possession of the business. Once you get rid of a loan from a financial organization or various loaners, you’re duty-bound to create the payments on time for the lifetime of the loan, that’s it. In distinction, if you hand over equity within the style of stock in exchange for funding, you may end up sad regarding input from outside parties relating to the long run of your business.
For More Information on Financial Services, Stay tuned with AlcorMNA!
There are Tax Deductions
A strong advantage of debt finance is that the tax deductions. Classified as a disbursal, the principal, and interest payment thereon debt is also subtracted from your business financial gain taxes. Professional tip: invariably refer to a tax skilled or different monetary planner to assist answer specific questions about however debt affects your taxes.
Low-Interest Rates are Available
Credit cards, peer-to-peer disposition, short-run loans, and different debt finance isn’t useful if the interest rates square measure enthusiastically. However, there's excellent news. A little Business Administration (SBA) loan may be a nice choice for inexpensive funds. With long terms and low rates, associate independent agency loan is that the gold customary for inexpensive finance. If you don’t qualify for associate independent agency loan, there square measure many different choices out there. Simply be conscious of verity price of that loan. Work with a loaner WHO practices complete transparency thus you doesn’t get at bay in a very cycle of borrowing. Perceive your total payment, each interest, and amortization. a decent rule of thumb is that if you sometimes have quite one payment per month or if the payment calculation is too difficult, mind and beware to not move forward.
Are you looking for a Financing Options? Complete the Enquiry Form!
You’ll Establish and Build Business Credit
The Global Entrepreneurship Monitor report, made by Babson school and different universities, found that one among the highest reasons for discontinuing a business within the U.S. were issues getting finance. Stellar business credit is crucial if you’re seeking inexpensive, semi-permanent debt funding. Therefore, having the flexibility to make your business credit may be a major and crucial advantage to confiscating a loan. Once you build your little business’ credit, you scale back the requirement to accept your personal credit or different high-cost business finance choices. Sensible business credit may also assist you to establish a lot of favorable terms with vendors.
Debt Financing Can Save A Small Business Big Money
Often, little business house owners accept pricy debt – like credit cards, money advances or lines of credit – to induce their business off the bottom. This kind of debt cuts into income and may hinder everyday operations. A giant advantage of debt finance is that the ability to pay off high-cost debt, reducing monthly payments by a whole lot or maybe thousands of bucks. Reducing your price of capital boosts business income.
Long-term Debt Can Eliminate Reliance on Expensive Debt
There are lenders who are using aggressive sales techniques to induce businesses to require out short-run money advances. Some businesses in would like of funds can intermit or six money advances in a very row. This strategy will lure a recipient into a debt cycle with without stopping in a website. Instead, look to induce associate independent agency loan. Independent agency loans have low-interest rates, long terms, and low monthly payments. Independent agency loans may be accustomed facilitate free little business house owners from borrowing traps.
About ALCOR Mergers and Acquisitions
Alcor M&A is a leading advisory firm providing financial services with an emphasis on customized solutions in the areas of M&A advisory, Joint Venture Advisory, Financial Advisory, Private Equity, Debt Financing and International Business Development. These Services leverages insights, relationships and a culture that emphasizes a strong orientation towards excellence.
For additional information on how ALCOR MNA can help you Grow your Company,Complete the Enquiry form One of our representatives will contact you within one business day.
