Malta Educational Clinic 911 June 2016 Enrico Ambrogi Corporate Finance Consulting The Prospects opportunity To provide Equity to SMEs is a pivotal topic in their development process A number of ID: 538787
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Slide1
Listing at Prospects. Some tips from the financial angle.Malta Educational Clinic - 9/11 June 2016
Enrico Ambrogi
Corporate Finance ConsultingSlide2
The Prospects opportunity
To
provide Equity to SMEs is a pivotal topic
in their development process;
A number of
Financing tools
(from Debt to Equity Financing, “mixed” instruments etc) do
cover different needs
, planning horizons, and have
different costs and implications
(direct and indirect, e.g. “
centrale
rischi
”).
The
over-reliance of SMEs on Bank (ST) financing
is a long standing, over-commented, feature of their relations with the financial markets. During the last decades countless papers have been written, and initiatives, institutions, alliances have been established to (try to) correct this (the magic word: undercapitalization). With limited avail.
So, when introducing the
Prospetcs
opportunity,
Pros, cons and some critical topics should be taken into account
.Slide3
Plus A
competitive tool
(cheaper and simpler than other comparable proposals, e.g. AIM, or “alternative” instruments, e.g.
minibonds
)
“
User friendly
” (logistic and “environmental” viewpoint)
With a
proper positioning
(operations’ size, limits, possibility to multiple rounds to finance expansions etc).
Mandatory incentive to continuously record and report financials
to an international community, leading to:
a. Increased transparency;
b. Standardizing procedures.
c. Organizational effort...Slide4
Plus_2 Brand promotion (automatically
leading to an higher value...
)
Envisaging an Exit strategy
(stronger than one-shot option, such as e.g. a traditional common private placement) for present shareholders (e.g. Generation change ).
A way to set/consolidate/increase the company value
, in the eye of banks, partners, clients...Slide5
Cons
(again, not a mistake!) mandatory incentive to continuously record and present financial to an international community, leading to:
a. Increased transparency;
b. Standardizing procedures.
c. Organizational effort
Possible appeal of Prospects
vis
a
vis
other financial centres/markets
Initiative still in a start-up phase (no case studies to be used as examples/promotion)Slide6
Key pointsSMEs’ selection: from the very beginning, to
make a distinction
between companies with good or poor chance to complete the process (due to corporate or personal reason, economic - and financial - performances, structural opacity, whatever).
Understanding the sheer reason why... (
new investments, consolidation (cash in on), mere value identification, perspective exit?
etc): different reasons mean different viewpoints and expectations.
Clear understanding of the
market illiquidity
(Prospects as a tool to reach certain goals, not a direct source of financing). Still,
from the Prospects standpoint,
opportunity to develop and increase its own visibility in the foreign markets (EU, middle East etc).Slide7
Key points_2Stress the chance to
reduce dependence on Bank financing
(mostly, but not only, on short term basis,
vis
a
vis
medium/long term investment requirements...).
Leading to “financial education” (it’s the same old story, but still relevant...). Useless to say:
room for consulting.
Visibility
(pro & cons...)
Mutual understanding on
company valuation fundamentals
(best practice
vs
peculiar “visions” of the counterpart: NOT a foregone conclusion). Risk of dead end if the topic is not properly addressed.
Sector-sensitivity of methodologies (e.g.: valuation in life science is different from the one in the real estate industry...).
Reality
vs
promises
(e.g.:
what if
the process reveals to be more complicated than expected in the eyes of the entrepreneurs). To stay on the safe side...
Many of these topics are related and intermingled
...Slide8
Role of the financial expert
Make the entrepreneur understand that the company need to be a self-sufficient entity, the more it identifies with the founder/owner (in terms of functions, powers etc) the lesser the
value.
The increase of the company value has to be the key factor
(the one perceived by the owner)
.
Partnering with the company owners,
focus on potential buyers from the very beginning
(focused limited road shows?).
Backing the company in the
pre-listing stage
, typically:
multi-yearly industrial plan
Planning of financial requirements and related sources
How the shareholders are expected (or plan) to cash in on, over the planning horizon.
.....Slide9
Thank you for your
attention