Now is an excellent time for closely held and family business boards to consider engaging in leveraged transactions to enhance shareholder liquidity and accelerate shareholder returns. The Biden Administration has not yet increased corporate or personal tax rates and interest rates are still low. Banks are seeking quality loans and your leveraged transaction might fit their bill. And perhaps your shareholders desire some liquidity from their ownership, even if you are not ready to don’t desire to sell your company.
In this post, two corporate finance tools available to owners of closely held and family businesses are discussed at length: Leveraged Dividend Recapitalizations and Leveraged Share Repurchases. These tools can be used to create liquidity outside the ownership of private businesses or interests in them.
Dividend Policy. Every company has one. The question is, is it a good one in terms of meeting the needs of your company’s owners? This post explains the concept of Net Operating Cash Flow (NOCF) (after-tax), which is the source for debt repayment, for working capital for growth, for replacement capex, and for growth capex. It is also the source for economic distributions to owners. Whatever your board decides about the uses of NOCF, your dividend policy is either consciously made or it is residual in nature.
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?
Regardless of how it is stated – every company has a dividend policy. In this post, we address the possible uses for a company’s Net Operating Cash Flow, reflective of its dividend and reinvestment policy.
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.
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.
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.
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.
In this post, we consider a hypothetical situation of a closely held or family business to discuss the concept of the special dividend.
Welcome to 2016! There will be changes to the focus of the blog in 2016. Read more about the changes here.