Smart Financing: the Value of Venture Debt Explained
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Working-Capital Financing of Small Business
WORKING,-CAPITAL FINANCING OF SMALL BUSINESS VICTOR L. AlDREWS, *" SEYMOUR FRIEDLANDt AND ELI SHAPIRO$ INTRODUCTION There are several important suppliers of short-term funds1 in our financial system. The means used by small concerns to secure short-term financing are associated closely enough with the institutional practice of these lenders that, in large part, the two must be considered together. Therefore, this discussion concentrates upon the financial relationships between small businesses and (I) the commercial banking system, (2) other financial intermediaries, (3) business firms in their lending activities, and (4) specialized financing institutions. THE DEMAND FOR SHiORT-TERM FUNDS There are strong incentives for business to finance short-term assets with short- term funds and permanent assets with long-term funds.2 Lack of access to external long-term debt and equity sources, however, compels small businesses to substitute short-term funds where long-term funds would be preferred. Thus, many small firms 3 are forced to finance permanent assets by continuously refunding short-term debt. * A.B. i95i, M.A. 1953, M.B.A. 1954, University of Chicago; Ph.D. 1958, Massachusetts Institute of Technology. Assistant Professor of Finance, School of Industrial Management, Massachusetts Institute of Technology. Contributor to economics publications. tB.S. I95O, M.B.A. 1951, Boston University; Ph.D. 1955, Harvard University. Assistant Professor of Finance, School of Business, Rutgers University. Contributor to economics publications. $A.B. 1936, Brooklyn College; A.M. 1937, Ph.D. 1945, Columbia University. Professor of Finance, School of Industrial Management, Massachusetts Institute of Technology. Research Staff, National Bureau of Economic Research. -
Still on the Rise the Kartesia Team Is Honoured to Receive the Pdi ‘Lender of the Year, Europe’ Award 2017
MARCH 2018 PRIVATEDEBTINVESTOR.COM ANNUAL REVIEW 2017 STILL ON THE RISE THE KARTESIA TEAM IS HONOURED TO RECEIVE THE PDI ‘LENDER OF THE YEAR, EUROPE’ AWARD 2017 “WE TRULY APPRECIATE THE RECOGNITION FROM OUR INVESTORS, PEERS AND BUSINESS PARTNERS FOR OUR PAN-EUROPEAN CREDIT PLATFORM FOCUSED ON SMALL AND MEDIUM SIZED BUSINESSES.” Kartesia is dedicated to providing fully customised financing solutions to the vast universe of c. 950,000 European small to mid-cap companies. Through our differentiated positioning on this growing private debt space, we have generated an attractive illiquidity premium combined with low loss rates, demonstrating our ability to offer strong risk-adjusted returns despite two credit cycles in the last decade. With continued hard work, strong credit expertise and passion we will endeavour to consistently deliver solid results to our investors. Brussels • Frankfurt • London • Luxembourg • Madrid • Paris • www.kartesia.com Any investment carries risk and you may not get back the amount originally invested. This document is for professional clients only and does not constitute a financial promotion, investment ad- vice or recommendation, offer or a solicitation of an offer to buy or sell any asset or interest by Kartesia Advisor LLP (authorized and regulated by the Financial Conduct Authority to provide invest- ment services), registered in England and Wales under number OC 385 042 with its registered offices at 14 Clifford Street, London W1S 4JU, United Kingdom, or any other entity of the Kartesia group. PRIVATE DEBT INVESTOR | ANNUAL REVIEW 2017 EDITORIAL COMMENT ISSN 2051-8439 Senior Editor Andy Thomson Tel: +44 20 7566 5435 [email protected] Special Projects Editor Andrew Woodman Tel: +44 203 862 7494 [email protected] A year we reached Americas Editor Andrew Hedlund Tel: +1 212 633 2906 [email protected] News Editor John Bakie dizzying heights Tel: +44 20 7566 5442 [email protected] Reporter Adalla Kim Going into 2017, the overall of a broader downturn. -
Working Capital Considerations in Middle Market M&A
Working Capital Considerations in Middle Market M&A Table of Contents I. M&A PROCESS OVERVIEW...........................................................3 II. WORKING CAPITAL CALCULATIONS............................................6 III. EXAMPLES....................................................................................9 IV. WORKING CAPITAL NEGOTIATIONS..........................................10 V. TRUE-UP PROCESS AND DISPUTES...........................................11 VI. RECOMMENDED TIPS.................................................................13 VII. ABBREVIATIONS AND DEFINED TERMS....................................14 VIII. CONTACT US...............................................................................15 WORKING CAPITAL CONSIDERATIONS IN MIDDLE MARKET M&A | 2 I. M&A Process Overview From start to finish, middle market M&A transactions can take anywhere from a few months to over a year to get to closing. Events and steps that typically occur along the way are depicted in the timeline below. Buy-Side Indication Due Confirmatory of Interest Diligence Due Diligence Closing Sell-Side CIM, Letter of Definitive Post- Due Management Intent Agreement Closing Diligence Presentations The M&A process above is a generalized depiction for illustrative purposes. It is not all- inclusive, and the actual timeline of events depends on a variety of factors, including how and by whom the sell-side process is being run. SELL-SIDE DUE DILIGENCE: While certainly not a requirement, many sellers go through a sell-side or anticipatory due diligence process. This may focus heavily on financial due diligence, and in particular a Quality of Earnings, or QoE, analysis. Investing in a sell-side due diligence analysis offers the Seller a number of returns, including but not limited to: (i) identifying and mitigating material issues without buyer involvement; (ii) avoiding unexpected adjustments to reported earnings that sometimes upend transactions in the late innings; and (iii) gaining a firm grasp on working capital considerations. -
Private Debt in Asia: the Next Frontier?
PRIVATE DEBT IN ASIA: THE NEXT FRONTIER? PRIVATE DEBT IN ASIA: THE NEXT FRONTIER? We take a look at the fund managers and investors turning to opportunities in Asia, analyzing funds closed and currently in market, as well as the investors targeting the region. nstitutional investors in 2018 are have seen increased fundraising success in higher than in 2016. While still dwarfed Iincreasing their exposure to private recent years. by the North America and Europe, Asia- debt strategies at a higher rate than focused fundraising has carved out a ever before, with many looking to both 2017 was a strong year for Asia-focused significant niche in the global private debt diversify their private debt portfolios and private debt fundraising, with 15 funds market. find less competed opportunities. Beyond reaching a final close, raising an aggregate the mature and competitive private debt $6.4bn in capital. This is the second highest Sixty percent of Asia-focused funds closed markets in North America and Europe, amount of capital raised targeting the in 2017 met or exceeded their initial target credit markets in Asia offer a relatively region to date and resulted in an average size including SSG Capital Partners IV, the untapped reserve of opportunity, and with fund size of $427mn. Asia-focused funds second largest Asia-focused fund to close the recent increase in investor interest accounted for 9% of all private debt funds last year, securing an aggregate $1.7bn, in this area, private debt fund managers closed in 2017, three-percentage points 26% more than its initial target. -
PREQIN and FIRST REPUBLIC UPDATE: US VENTURE CAPITAL in Q1 2020 PREQIN and FIRST REPUBLIC UPDATE: US VENTURE CAPITAL in Q1 2020 Contents
PREQIN AND FIRST REPUBLIC UPDATE: US VENTURE CAPITAL IN Q1 2020 PREQIN AND FIRST REPUBLIC UPDATE: US VENTURE CAPITAL IN Q1 2020 Contents 3 Foreword 4 Deals & Exits 7 Fundraising 10 Funds in Market 12 Micro Venture Capital 15 Performance 17 Fund Managers 19 Investors Data Pack The data behind all of the charts featured in this report is available to download for free. Ready-made charts are also included that can be used for presentations, marketing materials, and company reports. Download the data pack Preqin partnered with First Republic Bank to prepare this information regarding US Venture Capital. This report is for information purposes only and is not intended as an offer, solicitation, advice (investment, legal, tax, or otherwise), or as the basis for any contract. First Republic Bank has not independently verified the information contained herein and shall not have liability to any third party in any respect for this report or any actions taken or decisions made based upon anything contained herein. This information is valid only as of April 2020 and neither Preqin nor First Republic Bank will undertake to update this report with regard to changes in market conditions, information, laws, or regulations after the date of this report. This report may not be further reproduced or circulated without the written permission of Preqin and First Republic Bank. All rights reserved. The entire contents of Preqin and First Republic Update: US Venture Capital in Q1 2020 are the Copyright of Preqin Ltd. No part of this publication or any information contained in it may be copied, transmitted by any electronic means, or stored in any electronic or other data storage medium, or printed or published in any document, report or publication, without the express prior written approval of Preqin Ltd. -
The Effects of Working Capital Management on Organizational Performance - a Survey of Manufacturing Firms in Eldoret Municipality
Research Journal of Finance and Accounting www.iiste.org ISSN 2222-1697 (Paper) ISSN 2222-2847 (Online) Vol.5, No.5, 2014 The Effects of Working Capital Management on Organizational Performance - A Survey of Manufacturing Firms in Eldoret Municipality Daniel Kamau 1* , Amos Ayuo 2 1. School of Human Resource Development, Jomo Kenyatta University of Agriculture and Technology, Kenya. 2. Faculty of Commerce, Egerton University, Kenya. * E-mail of the corresponding author: [email protected] Abstract Working capital management is a crucial element in determining the financial performance of an organization. The purpose of this study was to investigate the relationship between working capital management (given by cash conversion cycle, CCC) and organizational performance (represented by profitability/returns) of manufacturing firms in Eldoret Municipality of Uasin Gishu County, Kenya. A sample of 13 manufacturing firms in the region was used in the study. Historical data on financial performance was collected from the annual financial statements of the sampled firms for a period spanning ten years. More data was also obtained from the managements of these firms through interview schedules and questionnaires. Performance was measured in terms of return on assets and return on equity while cash conversion cycle, current assets to total assets and current liabilities to total assets were used as measures of working capital management. Correlation and regression analysis were used for the analysis. The findings reveal that the working capital management is negatively correlated with return on assets (ROA) and return on equity (ROE) consisting the R values of -0.148 and -0.231 respectively. However, these figures are low, implying that there is no significant relationship between CCC and performance measures used in the study. -
The Leveraging of Silicon Valley∗
The Leveraging of Silicon Valley∗ Jesse Davis, Adair Morse, Xinxin Wangy July 10, 2020 Abstract Early-stage firms utilize venture debt in one-third of financing rounds despite their general lack of cash flow and collateral. In our model, we show how venture debt aligns incentives within a firm. We derive a novel theoretical channel in which runway exten- sion through debt increases firm value while potentially lowering closure. Consistent with the model's mechanism, we find that dilution predicts venture debt issuance. Em- pirically, treatment with venture debt lowers closure hazard by 1.6-4.4% and increases successful exits by 4.3-5.3%. Back-of-the-envelope calculations suggest $41B, or 9.4% of invested capital, remains productive due to venture debt. JEL Classification: G24, G32, L26, O3 Keywords: venture debt, venture lending, early-stage financing, entrepreneurship, start- up capital structure, levered equity, runway extension, moral hazard, optimality of debt, innovation finance ∗We thank Greg Brown, Diane Denis (discussant), Mike Ewens, Paolo Fulghieri, Juanita Gonzalez-Uribe, Radha Gopalan (discussant), Will Gornall, Arpit Gupta, Yael Hochberg, Yunzhi Hu, Josh Lerner, William Mann (discussant), Erwan Morellec (discussant), Ramana Nanda, Manju Puri (discussant), David Robinson, Luke Stein (discussant), Rick Townsend (discussant), Daniel Wolfenzon (discussant), Dong Yan (discussant), Alminas Zaldokas (discussant), Wenrui Zhang (discussant), and seminar participants at the Private Mar- kets Research Conference, NYU WAPFIN Conference, UNC, UT Dallas Finance Conference, Duke I&E Research Symposium, BYU Red Rock Conference, NBER Entrepreneurship, Australasian Banking Confer- ence, NZFM Conference, MFA, Southern California PE Conference, Stanford-Berkeley Joint Seminar, Global Entrepreneurship and Innovation Research Conference (Darden), EFA, WFA for helpful comments. -
Anatomy of an Asset Purchase Agreement
Buyer and Seller Beware: Navigating Business Purchase Agreements Nicholas J. Bakatsias Michael J. Allen Carruthers & Roth, P.A. 336-379-8651 [email protected] [email protected] 1 Anatomy of an Asset Purchase Agreement TABLE OF CONTENTS I. Article I – Definitions II. Article II – Basic Transaction A. Sale and Purchase of Assets B. Excluded Assets C. Assumption of Liabilities III. Purchase Price and Payment A. Purchase Price Amount/Form B. Net Working Capital Adjustments C. Contingent Purchase Price D. Purchase Price Allocation E. Escrow 2 1 Anatomy of an Asset Purchase Agreement IV. Closing Deliveries; Closing Conditions A. Deliveries by Sellers B. Deliveries by Buyer V. Representations and Warranties of Seller A. Consents; No Conflicts B. Organization; Qualification and Authority C. Financial Statements D. Absence of Undisclosed Liabilities E. Absence of Certain Changes or Events F. Title to Assets; Condition of Assets G. Accounts Receivable H. Tax Matters I. List of Properties and Contracts J. Real Property K. Legal Compliance L. Permits 3 Anatomy of an Asset Purchase Agreement V. Representations and Warranties (cont.) M. Labor Matters N. Insurance O. ERISA and Company Benefit Plans P. Litigation Q. Compliance with Laws R. Transactions with Certain Persons S. Inventory 4 2 Anatomy of an Asset Purchase Agreement VI. Representations and Warranties of Buyer VII. Pre-Closing and Post Closing Obligations VIII. Indemnification A. Survival of Representations and Warranties B. Indemnification by Seller and Shareholders C. Indemnification by Buyer D. Limitations on Indemnification E. Indemnification Claims Process 5 Anatomy of an Asset Purchase Agreement IX. Ancillary Agreements A. Restrictive Covenants B. Confidentiality C. -
SCORE Visa Financial Management Workbook
Welcome to Financial Management for Small Business EVERY BUSINESS DECISION IS A FINANCIAL DECISION Do you wish that your business had booming sales, substantial customer demand and rapid growth? Be careful what you wish for. Many small business owners are unprepared for success. If you fail to forecast and prepare for growth, you may be unable to bridge the ever-widening financial gap between the money coming in and the money going out. In other words, by failing to manage your cash flow, good news often turns to bad. At the same time, your business may be suddenly pummeled by a change in the economic climate, or by a string of bad luck. If you’re not prepared with a “what if” financial plan for emergencies, even a temporary downturn can become a business-ending tailspin. YOU CAN DO IT! That’s why every decision you make in your business—whether it’s creating a website, investing in classified ads, or hiring an employee—has a financial impact. And each business decision affects your cash flow— the amount of money that comes in and goes out of your business. We’ll help you with your decision-making with this online primer. Throughout this guide, you’ll find case- studies, examples, and expert guidance on every aspect of small business finances. You’ll see that our goal is the same as yours—to make your business financially successful. FOUR KEYS TO SUCCESS Maximize your income and the speed with which you get paid. Throughout this site, we offer tips and checklists for dealing with maximizing income. -
Update 1 to Mini-Code and Mini-Rule Annotations Subsequent to Publication of 2009 Editions
UPDATE 1 TO MINI-CODE AND MINI-RULE ANNOTATIONS SUBSEQUENT TO PUBLICATION OF 2009 EDITIONS TITLE 11 U. S. C. Sec. 101 2d Cir. Browning v. MCI, Inc. (In re Worldcom, Inc.), 546 F.3d 211 (2d Cir. 2008)(a "claim" exists if outside of bankruptcy claimant has a right to reach debtor's assets; this would include a claim for a continuing trespass under KS law). 5th Cir. Campbell v. Countrywide Home Loans, Inc., 545 F.3d 348 (5th Cir. 2008)(prepetition escrow defaults on a mortgage were "claims" for purposes of the automatic stay). 8th Cir. Milavetz, Gallop & Milavetz v. United States, 541 F.3d 785 (8th Cir. 2008)(attorneys who provide "bankruptcy assistance" to "assisted persons" are included in definition of "debt relief agency"). Sec. 105 1st Cir. Ameriquest Mortgage Co. v. Nosek (In re Nosek), 544 F.3d 34 (1st Cir. 2008)(sloppy accounting conduct by mortgage lender which did not violate a code provision or the terms of a chapter 13 plan would not support punitive and emotional damage award under 105). 9th Cir Rosson v. Fitzgerald (In re Rosson), 545 F.3d 764 (9th Cir. 2008)(bankruptcy court may convert a chapter 13 to a 7 on its own motion; unqualified rights of debtors may be limited by court's power to police bad faith or abuse of process). 10th Cir. Scrivner v. Mashburn (In re Scrivner), 535 F.3d 1258 (10th Cir. 2008)(court lacks equitable power to surcharge exempt assets to punish debtor misconduct). Sec. 302 2d Cir. Wornick v. Gaffney, 44 F.3d 486 (2d Cir. -
Private Equity & Venture Capital
VOLUME 14, ISSUE 6 ■ AUGUST 2018 PRIVATE EQUITY & VENTURE CAPITAL SPOTLIGHT THE RISE OF VENTURE AND IN THIS ISSUE GROWTH CAPITAL IN EUROPE €11bn in capital has already been secured by venture and growth capital funds focused on Europe that have closed this FEATURE 3 year; this is the highest figure seen at this stage in recent The Rise of Venture years. We put activity in the region under the microscope, examining the economic factors that have contributed to and Growth Capital in this. Europe Find out more on page 3 INDUSTRY NEWS 7 THE FACTS ■ Private Equity in the 9 PRIVATE EQUITY IN THE NORDIC Nordic Region REGION ■ Public Pension Funds 12 Investing in Private With the capital raised by managers based in the Nordic Equity region reaching record highs, we take a look at the growing private equity market in terms of fundraising activity, investor make-up and largest exits in the region. CONFERENCES 14 Find out more on page 9 RECENTLY RELEASED: THE 2018 PREQIN PRIVATE CAPITAL FUND TERMS THE 2018 PRIVATE CAPITAL All data in this newsletter ADVISOR can be downloaded to PREQIN FUND TERMS ADVISOR Excel for free Order Your Copy Download Sample Pages Sign up to Spotlight, our free monthly newsletter, providing insights into performance, investors, deals and fundraising, powered by Preqin data: Alt Credit Intelligence European and US Fund Services Awards: Best Data and Information Provider | Africa Global Funds Awards 2016: Best Research and Data Provider | The Queen’s SIGN UP Award for Enterprise: International Trade | HedgeWeek Global Awards: -
Venture Debt for Tech Companies |
1 VC & TECH BRIEFINGS GERMANY 1 Orrick, Herrington & Sutcliffe LLP 1 Herausgeber: Published by: Orrick, Herrington & Sutcliffe LLP, Orrick, Herrington & Sutcliffe LLP, Heinrich-Heine-Allee 12, 40239 Düsseldorf, Deutschland, Heinrich-Heine-Allee 12, 40239 Düsseldorf, Germany, Tel.: +49 (0)211/367870, Internet: www.orrick.de tel.: +49 (0)211/367870, internet: www.orrick.de Vertretungsberechtigt in Deutschland und verantwortlich für Authorized representatives in Germany responsible for the editorial redaktionelle Inhalte i.S.d. § 55 Abs. 3 des Staatsvertrages für content according to § 55(3) Interstate Broadcasting and Telemedia Rundfunk und Telemedien sind Dr. Oliver Duys und Dr. Christoph Agreement (Staatsvertrag für Rundfunk und Telemedien) are Brenner (Managing Partner Deutschland), Heinrich-Heine-Allee 12, Dr. Oliver Duys and Dr. Christoph Brenner (Managing Partner 40239 Düsseldorf und Rosental 4, 80331 München Deutschland, Germany), Heinrich-Heine-Allee 12, 40239 Düsseldorf and Tel.:+49 (0)211/367870, E-Mail: [email protected] Rosental 4, 80331 Munich, Germany, tel.: +49 (0)211/367870, email: [email protected] Copyright: Copyright: Orrick, Herrington & Sutcliffe LLP, 2019. Alle Rechte vorbehalten. Orrick, Herrington & Sutcliffe LLP, 2019. All rights reserved. Das Orrick-Logo und “Orrick, Herrington & Sutcliffe LLP” sind The Orrick logo and “Orrick, Herrington & Sutcliffe LLP” are eingetragene Marken der Orrick, Herrington & Sutcliffe LLP. trademarks of Orrick, Herrington & Sutcliffe LLP. Version: Mai 2019 Version: May 2019 Haftungsausschluss: Disclaimer: Diese Publikation dient allein der allgemeinen Information und This publication is for general informational purposes only without berücksichtigt nicht die individuellen Umstände des Einzelfalls. consideration to specific facts and circumstances of individual cases Diese Publikation erhebt keinen Anspruch auf Vollständigkeit. and does not purport to be comprehensive.