Capital Raising for Small Business
Since the Global Financial Crisis, investors and promoters alike have become more discerning in the number of projects that receive serious attention and those for which people are willing to invest into.
As investors come back into the market they do so with increased levels of scrutiny and it’s important that any approaches for capital are done so in a professional manner. You need to have a very definite and thorough business plan in order to assist you in achieving your objectives.
What is Capital Raising?
While there is a significant amount of investment capital available in Australia, for entities trying to raise that capital it can be a tough road, particularly for early stage or start-up companies. In addition, Australian investors are generally more conservative in their capital allocation decisions when compared to our foreign counterparts.
For businesses seeking capital
iMoney is able to assist with Capital Raising Activities and bring together investors and the companies that need those funds. At iMoney we are able to assist with Capital Raisings for a broad spectrum of different sized organisations. Whether it be for an ASX listed company or a Private company needing Capital for expansion or Acquisition purposes then we can deliver a professional and uncomplicated process that meets the needs of all parties.
We are able to offer a variety of opportunities to cater for the most discerning of investors. We are dedicated to bringing you investments designed to enhance and maximise return on investment or improve a diversification in your portfolios. Our targets are selected from a wide range of investment opportunities, some of which may be exclusively for our network. This is achieved through our access to strategic placements including unique deals through our international connections.
To have timely and priority access to opportunities, investors may register to be included on our Wholesale Investor Program. Participants in this program will have priority access to arising opportunities and information that we will provide on current offerings and progressive updates as the investment unfolds.
Some useful tips on “How To” raise capital are:
- How do you know who is in the same “space” as you competing for the same available capital from investors?
- How to build your network of potential investors; including VC, Angel investors etc well in advance of actually needing the Capital? Should you leave it till later or not?
- How to research your prospective sources of capital to see how they operate. If they have invested in your industry before, what are their requirements and what was the outcome?
- How to establish what “turns them off” so you don’t make any innocent mistakes to put them offside during the process.
- How to make sure the parameters are set early in terms of how much funding is needed. What are the funds being used for? What is the size of the equity position?
- How would you know if your valuations and projections are realistic? Nothing will kill a deal quicker than over optimistic forward estimates.
- Should you commit any “in principal” agreements to paper as soon as possible with a sign off by authorised members of both parties?
- How to have a folder of “Due Diligence” information established well in advance and update it regularly. How to make sure you are very organised in this area as it builds confidence.
- When and how to make sure your advisors have the relevant experience and make sure you have a good working relationship. Cost is second to having the correct people on the job as they will complete the tasks faster anyway.
Reasons and Types of Capital Raisings
Typically our Capital Raising activities are centred on the following:
- To Promote Growth internally and through acquisition
- Take advantage of new opportunities as they arise
- To create relationships with investors for possible participation in future funding rounds
- Seek “Marquee” investors and “sophisticated” investors, to assist in the promotion of the growth of the business
- Pre IPO Capital Requirements.
Some available sources of Capital are, but not limited to, the following:
- Private Equity
- Australian Stock Exchange (ASX)
- National Stock Exchange (NSX)
- Bendigo Stock Exchange
- Retail Investors
- Wholesale Investors
- High Net worth Individuals or Entities
- VC Funds
- Lenders -Traditional and Otherwise
- Specialist Financiers eg Working Capital Financiers
- Investment / Corporate Banks
ASSOB (Australian Small Scale Offerings Board)
What is the ASSOB? ASSOB stands for the Australian Small Scale Offerings Board. Since its inception in 2004 it had a specific purpose. This purpose was to provide a platform for the management and transaction of securities for unlisted companies for their capital raising requirements.
What does ASSOB do? The modern day ASSOB platform has become a progressive one which includes an advanced system of financial documentation and operational infrastructure developed intentionally to comply with Corporations Law and its specialist Class Order 02/273. ASSOB operates over 3 main Boards:
Primary Issue Board – deals primarily with the initial issuance of share capital and associated matters to investors on behalf of issuers companies to actually raise capital;
Secondary Sales Board – which facilitates the sale or transfer of existing shareholdings to other investors;
Disclosure Board – under which all regulatory and compliance matters on disclosures are distributed to list of potential investors including the general public. ASSOB Sponsors consist of highly trained operators who play an important role in capital markets. The ASSOB Sponsor is responsible for the “origination” of debt and equity securities for their client. An ASSOB Sponsor’s primary obligations are the provision of the SME with the legal exemption to transact securities or scheme interests and the appropriate framework for conducting these activities within the confines of the Corporations Act 2001
Mergers and acquisitions
For many companies a way of growing their organisation is through mergers and acquisitions. In its intended form it can provide a company with opportunities to expand its operations for strategic positioning in and in a value added manner. How to utilise our extensive contacts: We can manage the total sales process, including valuing the business or its assets separately, preparing an information memorandum, help with the marketing of the business to potential buyers, negotiating the price negotiations and terms of sale, and liaising with various parties / professionals. We liaise with a host of other professional advisors including accounting, legal, stockbrokers, and others, when required.
Would you like to have access to experienced merger and acquisitions professionals that can deliver constructive transaction management during the M&A process? These include:
- Ascertaining strategic options;
- Establishing achievable objectives and benchmark criteria for potential acquisitions;
- Identifying possible targets for acquisition;
- Transaction advice regarding structuring and pricing;
- Conducting Capital Raising for the target acquisition;
- Achieving key stakeholder and regulatory body approval;
- Conducting or overseeing the due diligence;
- Conducting transaction Negotiations if required; and
- Assist with integration and restructuring if required.
- project management on a “one off” or ongoing basis
- To ensure a smooth and trouble free transaction right through to completion.
Sometimes growth and expansion opportunities can be achieved through a strategic relationship such as a Joint Venture (JV) or alliance. In these circumstances we can act as a rainmaker or a negotiator.
What Corporate Advisory Services and Entrepreneurial Support can we offer? We can provide a range of associated advisory services for smaller to medium sized companies seeking to raise capital. These include the management of regulatory compliance (including ASX), corporate structuring, financing support, broker negotiation and a range of ongoing advisory support.
Strategic Financial and Corporate Advice
Other important services that support the Capital Raising Issues are
- Value creation and exit strategies
- Defining clear corporate strategy
- Financial & balance-sheet restructuring
- Management buy – outs and buy ins
- Provision of Working Capital & Debt raising
- Pricing terms & conditions of finance
- Financial modelling
- Analysis and corporate structure reviews.
How important are Divestments? An important part of corporate life is to monitor the commercial life cycle and help determine when sectors of your business are ready for sale. Through our strategic networks we can assist you to market the business effectively and maximise the best possible exit price.
Should you utilise our Mentor service? We can act as “mentors” through the capital transition process. We can also get involved where you are considering going public and assist you with the Initial Public Offering (IPO) process, including the management of professional advisors, until listing.
We have access to various financial institutions that could provide underwriter services or take up an equity position. Accordingly, we would help consider the identification and involvement of subscriber capital investors. We can take the position or assist with the selection of an independent Lead Adviser or Accountant to the IPO.
We aim to provide assurance and comfort to you in the decision making process. Our thorough due diligence review process is conducted by high level advisors and also considers operational procedures to report on any perceived issues that may impact negatively on the value of the business. We will:
- Work with you to ascertain and outline the scope of the assignment to ensure key areas are outlined appropriately
- Undertake the due diligence duties in an efficient and timely manner
- Prepare due diligence reports that are “user friendly” and provide a succinct summary of the key factors pertinent to the acquisition decision or on other operational matters
- Provide advice on the best way to structure the transaction
- Utilise the skills of our alliance professionals in Direct and Indirect Taxes to ensure all tax issues have been considered appropriately
- Assist and advise in relation to the contractual documents relating to the acquisition
How to secure successful Funding? The success in finding suitable investors is strongly linked to the ability to offer them a realistic valuation in return for the risk the project offers. It is important not to create illusions of the valuations being too optimistic which is a sensitive issue for investors and can seriously impact the capital raising function.
What is a Valuation threshold? Typical valuation measures usually operate within a band of 6 to 8 times EBIT for organizations considering an Initial Public Offering on the stock market listing, or alternatively 3 to 5 times EBIT for a trade sale. Investors will be prepared to pay a premium for their stock over current valuation if they have confidence that the business will enjoy strong growth.
Initial investors will want to pay on a substantial discount to market on their initial investment in return for the risk they carry, and consequently expect their returns to have significant “over performance” over other competing investment options. Please note that investors will want a firm and extensive exit plan. After all if they cannot get their money out they are unlikely to invest at all.
Our advisor network can assist with the production of independent expert reports, including those to satisfy ASIC and the ASX Listing Rules. The value of a business is not just a function of its financial records. Consideration needs to be given to many aspects of a business for valuation purposes, including intellectual property and intangibles including brand names, trademarks, databases, exclusive contracts and distribution channels etc.
As a part of the valuation process we will prepare a business and equity valuation report. These reports are fully compliant for the purposes of options valuations and purchase price allocation reports in accordance with requirements under AASB 2 and AASB 3 for the purposes of financial statement accounting.
What are our Transaction services? Our transaction services are designed with the intention of reducing your working capital cycle and more efficient management of cash. Our alliances with cash management professionals who are experienced in the provision of customised solutions for your business in terms of:
- Producing processes and systems efficiencies relating to the transactions
- Management of unutilised cash liquid reserves as well as short term alternatives for investment
- Minimising transactional costs
- Improvements in timing for cash-flow issues
- Providing interchangeable solutions that meet your changing needs.
There is also the access to our professional alliances that can assist with cross border transactions. What is needed here is the ability to have people who understand the nature of foreign currency fluctuations and mitigating the adverse effect these can have.
With our Strategic Partners we deliver a team possessing a diverse set of skills who work in a collaborative environment serving the key decision makers of small public and private organisations. Our focus is on the delivery of practical outcomes. We aim to be our clients’ first choice when faced with high impact decisions, find ways to positively impact financial performance, and for forward planning matters for their organisation. Our clients place high value on our ability to understand their specific needs.
Working Capital Solutions
The working capital requirements of a company deserve thorough consideration. Each client has different requirements in this regard and needs an individual approach. Specialist working capital requirements are also something our team of experts can deliver. In particular supply chain financing, Inventory Funding, Receivables Finance etc
Corporate Reorganisations usually refer to two main elements of a company’s corporate well being
Firstly there is a Reorganisation of the Company’s Capital and Financing Structure. Secondly there is a reference to the Physical presence of the company and the way it interact its various business units in a meaningful and efficient way.
Corporate Reorganisations of the Financial Structure of the Business encompasses many different spheres and activities. They can include share buy backs, capital reductions and consolidations. Whether it be revitalising the Balance Sheet, reducing debt, or increasing short term liquidity capabilities. Sometimes a firm is recovering from a period of external administration and needs to re-establish its Balance sheet or whatever the reason we can advise on such matters. There are many legal and possibly capital gains tax issues as well as stamp duty issues that arise from these activities. We have access to the team to expedite the above processes and keep your organisation moving forward efficiently.
Corporate reorganisations are an inherent form of performance management. Strategic reviews of departments and business units provide opportunities to look at each process in the organisation to determine better efficiencies. Sometimes it is simply a matter of improving the decision making process between the different departments in the value chain to be more competitive against your rivals
Commercial and project funding
Specialist Funding such as this must be actioned in a timely and effective manner. The ability to promote your needs to the most appropriate underwriter is of critical strategic importance when trying to bring a project to fruition
Structured asset finance
Why is Structured Asset Finance important? Why is Asset Finance an incredibly important part of anyone’s business? It has to be quick, flexible, timely and actionable 24/7. When it is not practicable to create additional stand alone documents for each asset purchase then you need a flexible facility with a simple operating structure to allow you to make decisions as they arise in the comfort that you have the limit in place and the backing of your financier to make the transaction. Our contacts in Asset Financing will leave you with the comfort that you have their resources on stand by at all times.