What is Your Company’s Dividend Policy?

shutterstock_213583006

This video post asks business owners and advisers two questions: 1) Is your company’s (or your clients’ companies for advisers) dividend policy a good one that is meeting the needs of its owners for current income versus capital appreciation? And 2) If not, do you need to be working on your dividend policy to improve its effectiveness?

Dividend Policy Is Part of Corporate Finance for Private Companies

shutterstock_475568098

Business owners are faced with three universal questions as they run their businesses. These questions are addressed by every business every year, one way or the other, directly or indirectly, consciously or unconsciously. This post addresses these three questions.

Corporate Finance in 30 Minutes

For Private Company Owners and Directors

banner_corporate-finance-30-mins

Mercer Capital’s Travis Harms wrote a series of four whitepapers under the umbrella of Corporate Finance in 30 Minutes. In this series of white papers, Travis makes something that can sound arcane and difficult, like corporate finance, accessible for business owners and advisers. The first paper is an introduction to corporate finance for private businesses and introduces the three key questions of corporate finance that owners of private businesses face. The subsequent whitepapers address these key questions.

Overview of Corporate Finance for Private Businesses

#5: Handbook on Business Valuation for Business Owners

banner_handbook5

We continue the series today with the topic of Corporate Finance, which is about maximizing the value of a firm or business. The three parts of the corporate finance decision tree for public and private businesses are: an investment (or reinvestment decision), also called capital budgeting; the financing decision, also called capital structure; and the dividend or distribution decision. By addressing each of these decisions, corporate managers and boards determine what will be done with available cash flows. The effectiveness with which they make these decisions determines, in large measure, the success of value creation for private firms.

Yahoo’s Demise and Lessons for Private Business Owners

banner_yahoo-demise

On Monday, July 25, 2016, Verizon announced the acquisition of the operations of Yahoo for $4.8 billion. I waited on this post because it really isn’t about Yahoo, but about lessons for closely held business owners and their advisers. In any event, that $4.8 billion value for Yahoo’s operation was a far cry from previous indications of value for Yahoo.

11 Potential Private Company Dividend (or Distribution) Policies

Your Company Does Have a Dividend Policy

banner_11-types-dividend

Two standard questions business appraisers ask clients in the management interview process include: What has been your dividend (or distribution) policy leading to the present?  Now this is something of a trick question, because we can infer what the dividend policy has been in the past based on examining financial statements. What do you expect […]

Leveraged Dividend Recapitalizations and Leveraged Share Repurchases

Understand the Similarities and Differences and Which Transaction May be Right for Your Company

banner_leveraged-Dividend-Recapitalizations-Leveraged-Share-Repurchases

Leveraged dividend recapitalizations and leveraged share repurchases are two corporate finance tools that are available to owners of private companies. These tools can be used to create liquidity outside the ownership of private businesses. Interestingly, as we will see, leveraged dividends and leveraged repurchases have very similar impacts on companies (assuming similar companies and same-sized transactions), and quite different impacts on the owners of the companies. In this post, we will illustrate the impact of a leveraged share repurchase and a leveraged dividend on the same company. This analysis will enable us to see the impact leverage has on the company and also, the different impacts the transactions have on owners.