All strategic decision will eventually be reflected in financial indicators. Following is selection of strategic decisions impacting ownership structure and/or impacting projected financial results including selected topics and questions to be addressed during the process of evaluation.
- Entrance of strategic or financial investor in company's ownership structure
- Do we need capital for expansion?
- Is there a synergy potential between our company and investor's company (new markets, reduced costs, know-how sharing, etc.)?
- Is public offering of shares feasible and acceptable way of financing?
- Which risks are we exposed to in case we remain independent?
- What is the value of our company?
- Sale of a company
- Do we have a successor within the family who will run the business (in case we deal with family owned and managed company)?
- Have we reached maximum in independent growth and development of our business?
- Do we have adequate financial strength and management able to further improve our business?
- Is consolidation and mergers in our industry inevitable way of maintaining or improving profitability?
- Is management capable and willing to take over the company from existing owners?
- Which risks are we exposed to if we don't sell the company?
- What is the value of our company?
- Acquisition of other businesses
- What is the main reason for potential acquisition of target company and is this reason valid?
- Are we interested in whole or part of the target company's operations?
- Are there any synergies between us and target company?
- Is target business undergoing structured sale process run by investment bankers and are there other interested buyers?
- What would be reasonable valuation of the target company?
- How are we going to finance transaction?
- How do we plan to integrate operations of two businesses after acquisition?
- Is there a natural buyer of target company in case we subsequently decide to sell it?
- Choosing financing structure (debt vs equity)
- Do we have a need for external financing?
- Is external financing needed for restructuring purposes or for fueling further growth of a company?
- Are we overleveraged from static point of view (net debt/EBITDA, debt-to-equity ratio) or dynamic point of view (projected free cash flow of a company in relation to repayment schedules of existing debt obligations)?
- Do we have access to additional debt and under which conditions?
- What is company's degree of operating and financial leverage prior to and after additional external financing?
- Are we ready for entrance of strategic or financial investor in ownership structure through recapitalization process?
- Is public offering of shares feasible and acceptable option of financing?
- What is the value of our business and which ownership stake should new owner have after recapitalization?
- Debt restructuring / refinancing
- Are maturities of existing debt obligations aligned with projections of free cash flow available for debt service?
- Do we have alternatives in terms of access to debt and under which conditions?
- Are existing creditors able to provide additional debt financing?
- Is debt restructuring prerequisite for entrance of strategic or financial investor in ownership structure?
- Is company in situation where part of debt obligations has to be converted to equity?
- Merging companies from the same group into a single legal entity or spinning off part of existing business into separate legal entity
- Would merging companies into single legal entity enable cost savings or improve certain processes leading to better efficiency and ultimately improved profitability?
- Would merging reduce amount of administration and facilitate management with focus on better results of the whole group instead of each particular company (currently operating as independent legal entities)?
- Would parts of the system become more flexible and competitive if carved out and run as separate / independent businesses?
- Are certain parts of the system considered as non-core business and should be carved out and prepared for sale?
- Transfer of ownership between related companies and/or private individuals
- Would transfer of ownership between companies create tax savings or other form of more desirable ownership structure?
- Should ownership in a number of companies be replaced with ownership in a holding company?
- Is for given purpose better to have ownership being held by private individual or a company?
- Treatment of non-operating assets
- Which parts our assets are considered non-operating and can they be put into operations?
- To which extent are non-operating assets liquid?
- Are non-operating assets potentially useful for purposes complementary to company's core business?
- Should non-operating assets be carved out into separate legal entity?
- What would be the tax implications of a sale or carve out of non-operating assets?
- Investments in production or distribution facilities including enlargement or change in product and service portfolio
- What are expected implications of anticipated investment decision on company's future free cash flow?
- How would investment be financed and under which conditions?
- Is planned investment generating positive NPV?
- What is expected rate of return (IRR)?
- What if we decide not to invest or postpone investment decision?
- To which extent would new product cannibalize existing product portfolio?
- How does a company's projected free cash flow look if we don't change existing product and service portfolio?
- Modeling and simulation of different scenarios of business development with quantified effects on company's projected income statement, balance sheet and cash flow
- Which variables from strategic financial plan have greatest impact on company's forecasted income statement, balance sheet and cash flow?
- Which scenario indicates a need for recapitalization or other means of external financing?
- Which scenario contains real options i.e. possibility of subsequent decisions about individual actions depending on future developments (e.g. additional investments if thing go well or possibility to swiftly abandon production if things don't develop in desired way)