Tag Archives: Property

How Do You Attract Investment to a Small Company? Four Perspectives

Situation: A small company seeks outside investment to support its growth. The company’s industry is dominated by large, well-recognized players. These companies have historically been the company’s customers; however, they have a quarterly mindset, and are increasingly looking to support their own development groups. How do you attract investment to a small company?

Advice from the CEOs:

  • What is the company’s ROI and risk profile?
    • Positive ROI, particularly taking advantage of new distribution channels.
    • ROI turnaround is typically 1-2 years.
    • There are about 50 similar companies in the market.
    • The company possesses intellectual property that makes it appealing.
    • Project maturity is generally considered a risk in the industry – it is not as experienced or mature as other industries.
    • An additional risk is that new developments in online distribution are continually changing the industry environment in unpredictable ways.
  • Investigate and approach companies in other industries with similar structures – dominated by large players but with a healthy presence of smaller companies. Examples include the movie industry and real estate pools.
    • Talk to investors who are familiar with these industries to see whether they would be interested in investing in the company’s projects.
  • There is a good deal of money out there looking to beat the current returns available through the stock market and paper investments. Look for an angel investor.
  • Given the Risk/Reward structure of the industry, approaching professional investors may be the best bet for the company.

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How Do You Handle Open Issues from a Sale Agreement? Three Thoughts

Situation: A CEO has closed the sale of a significant company property. Due diligence was completed and was satisfactory, but the purchaser now wants to renegotiate the price. The CEO is concerned that if she yields on the price, the buyer will come up with additional changes that will further disadvantage the sale. How do you handle open issues from a sale agreement?

Advice from the CEOs:

  • One member had a similar issue following the sale of a previous company. The decision was that the price at the time of close was the price. The buyer had full opportunity to perform due diligence which would have uncovered any open issues. Condition at time of sale is “buyer beware,” which is why they were allowed a full due diligence.
  • The sale was “as is” including assumption of current debt on the property. It appears that the advantages to the buyer that are anticipated through the purchase will more than offset the impact of the existing debt. As a result, the buyer is, on balance, better off than they had anticipated. Thus, there is no need to yield on price.
  • On the timing of events that may not occur – an indirect cost audit by the company’s prime agency should this be necessary – there is a question of the financial impact to the company.
    • There is a default date on the final payment that could be held up by the negotiation, but the impact is not significant to the company.
    • Otherwise, the company’s interests are covered by the sale agreement.

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