The risks associated with debt are greater as the tightrope walker’s rope is higher. As such, while taking on debt to invest and achieve business continuity is a good option, it cannot be taken lightly. You need to analyze the company’s liabilities well in order to make the best decisions. (Sorry, the video is unfortunately only available in Spanish)
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A new partner for my company?!
Inviting a new partner to my company can be a great option.
The associated increase in working capital can perhaps bring the dynamism back to our company that we could need right now.
Yes, it is possible to find this partner! (Sorry, the video is unfortunately only available in Spanish)
In times of crisis: “Cash is King” is even more important!
A thorough review of cash flow and what is limiting or relaxing it is vital in your business. Establishing concrete plans to improve the efficiency of the collection of accounts receivable, to achieve longer payment terms to suppliers and to improve inventory turnover are fundamental tasks for creating value in the company.
A healthy handling of the company’s liquidity is of strategic importance in order to guarantee the solvency of our activities. It is important to review the company’s financial health, properly manage revenues, prioritize expenses, and ensure they are efficient. (Sorry, the video is unfortunately only available in Spanish)
Should you think about buying or merging with another company?
Remember to always ask yourself if your company’s ability to create value is being fully exploited.
Buying all or part of the shares of another organization is an excellent business opportunity as long as the right value is paid for it. Even if the acquired company is the right one, making a mistake in the amount to be paid could negatively impact the return on investment. This emphasizes the importance of performing an effective valuation process and a smart negotiation strategy.
If you already are a shareholder of an organization, you may have the opportunity to strategically enhance your business value by acquiring totally or partially the shares of another company that could be a competitor, a supplier of raw materials or a participant in the chain of production of the currently owned organization.
The interest to acquire a certain organization could be reciprocally, hence giving room to start a merging procedure. However, in this case the valuation becomes an important element to establish the shares’ percentage of the prevailing company, as this is determined by the valuating the shares of the merging companies individually.
Preparing a company to be sold should be seen as an ordinary process, never intending to hide the elements that devalue it, but rather taking the necessary corrective actions to prevent the same elements to negatively impact the valuation process.
We must also take into account …
The due diligence process (study carried out to examine in detail the different areas of the company) to ensure:
1. the veracity of the information provided by the counterpart,
2. the risks that must be mitigated are identified,
3. the contingency measures that must be considered are established, and;
4. perform a systematic analysis that determines whether or not these risks should be accepted, under what circumstances and how they impact on the price of the negotiation.
If you are considering buying or selling your company, or a part of it, let’s work together to define the right value and design and execute the best strategy that guarantees a successful closure.
Handling sensitive information with other parties must satisfy the standards established by our firm. This includes not revealing sensitive information about your company while enabling the growth of the interest of the potential buyer with the appropriate information. Our firm evaluates and classifies information according to the level of sensitivity. The information is always provided gradually to the prominent buyer’s depending on the different stages of the negotiation and as the buyer’s materializes its commitments.
If you want to consider selling your company or a portion of it, let’s work together to define the right value and perform a strategic search that leads to the right buyer.
What should you ask yourself as a shareholder about the value creation of your business?
In times of crisis, we tend to ask ourselves critical questions. This is often called to “stop along the way”, however; the most important thing is to start reflecting and solving the questions that derives towards making the best business decisions.
The financial best practices tell us about creating value by improving profitability over equity (Net Profit / Equity) hence, the profits once distributed (dividends) represent personal assets in the hands of the shareholders; and that is, value creation achieved by the company you own. The more profits an organization is able to distribute for every dollar invested by a shareholder, the more profitable it will be and the more value it creates.
The key question here is: what factors affect the profitability of the company’s equity I own? Each company has a particular answer to this question, however; there are some basic principles that apply to all types of companies and that best serve to analyze the factors that directly impact the profitability on equity. Let’s explore them.
The first factor is the capacity of each dollar invested by shareholders in equity (mainly capital stock and retained earnings) to generate assets. This is provided by the trust that third parties such as banks and suppliers have in the company and, therefore, lend money or sell raw materials and finished products on term / credit. This is positive up to a certain level and up to a certain cost.
Another factor is the capacity of each dollar invested in assets (inventories, accounts receivable, fixed assets, etc.) to generate sales or income. The assets will be more profitable to the extent that they can generate more sales or income; which is different from a company that makes huge investments in a vacant lot that does not generate sales. A successful business rather invests the same amount of money in inventories that generate sales, or in a fleet of vehicles to distribute the products it markets.
Finally, the capacity of each dollar obtained from sales or income to generate net profits. This has to do with the elements of the business’s costs and expenses (costs of the merchandise, salaries, rentals, interest, insurance, taxes, etc.). Sales will be most profitable with lower costs and associated expenses; as well as better inventory and accounts receivable turnover.
The above briefly describes the ability of a company to create value for its shareholders. The effective application of these elements is critical to positively impact the return on equity and consequently towards the shareholder’s dividends.
Evaluating general conclusions based on these great aggregates, allow us to effectively analyze the value creation of each company and define the best action plan towards achieving the organization’s goals.
What should you do today with your business shares?
Should you sell all or part of them and get of your capital back?
With the latest changes in the markets’ rules and best practices; will it be appropriate for your company to substitute debt for equity? Have you ever wondered if your company’s ability to create value is being fully exploited? Is your company generating the optimal amount of cash? And the question that resonates on many occasions; will it be time to sell all your shares or a part of them? If you believe that the value creation of your organization is not at its best, then the answer to this question is: yes, it may be time to sell your shares.
Answering the previous questions is not something that comes overnight. This depends on a continuous analysis of your company, its owners, and the expectations you may have.
Think of value creation in a much broader sense than only financials.
Asking yourself the questions we present in this article is good a practice. Without a doubt, this analysis will also help you to answer the following: how much is the company worth and what actions should be taken to maximize its value?
Before anyone decides to sell his/her shares, the first thing to know is how much they are worth. Even, someone who has not thought of selling them should still be aware of their value. This is appropriate not only to be able to evaluate their value over time, but also to make intelligent decisions when faced with a selling opportunity.
If I know the value of what I hold, I know what is the price I can accept.
Within our business valuation analysis, we believe it is essential to understand very well what the shareholders want. Once this is defined, we would work towards setting the tasks that fulfill the original purpose and ensures a successful closure.
Creating value for your organization and its shareholders is our reason to be
We provide financial support from knowledge and experience.
We are Julian Burlage and Manuel Párraga. Together we create Zenith.
I am Julian Burlage, an entrepreneur and business consultant with experience in marketing, sales and complex project structuring.
I graduated as an Engineer in Bremen, Germany and came to Costa Rica in 1992 when I fell in love with this country. God permitted me to build organizations like AutoStar, Seele & Geist, The Nail Bar and Green Integrated Energies, among others. I also had the opportunity to develop the business model of internationally recognized organizations like Mercedes-Benz, Chrysler, Dodge, Jeep and Frightliner in Costa Rica and Nicaragua. We also developed the business model for recognized brands within the beauty and retail industry such as OPI, Wella, Kerastase, L’Oréal, The Nail Bar and a new business concept and customer experience for the main shopping centers in the country. It is a privilege to be at your service through Zenith.
I am Manuel Párraga. I have served in the financial industry as a banking professional occupying senior management positions with major financial groups like Scotiabank, Cuscatlán and Improsa. I have also worked for international organizations, corporate finance firms and leasing companies.
I obtained a Master’s Degree in Business Administration from INCAE and a Post Graduate Degree in Privatization in Italy. Shortly after graduation, I held the General Management role in an international organization that exported goods to the U.S. Leading teams simultaneously across different countries has been a very enriching experience that provided a wide intercultural vision which allowed me to understand the dynamics of economics, political environment and fiscal policies at the local and international level.
This was only possible by God’s will and I am passionate about making it available to you through Zenith.
By combining our complementary experiences, we decided to build Zenith, creators of value and financial advisory to support the growth of your business.
We would like to add to our cover letter our extensive network of contacts in areas such as international real estate brokerage, real estate project developers, owners and operators of free trade zones, national and international investors and other professionals in finance, accounting, law, design and architecture, among others. This is another essential component towards designing the successful execution of your project.
We deeply believe in what we do and we want to add value to your organization.
Our services are built around the principles of integrity, trust and discretion, because we understand that companies and investments are more than just numbers.
We want to work with your assets and investments as if they were ours to generate the maximum value for you.
Our main areas of service are: mergers and acquisitions, strategy and business transformation, financial restructuring, structuring of business projects and structuring of real estate projects.
Our joint work is at your service. We are Zenith!