How to Deal with your Work Force in Financial Crisis May 12, 2009
Posted by buyouts in Investment.Tags: work force
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In the current economic downturn there is an undeniable pressure to decrease headcount, support costs and office expenses. At the same time companies must focus on attracting and retaining high caliber talent from the global marketplace. Ultimately, this process of de-weeding and planting new seeds will increase organizational effectiveness and mitigate business risks from a multitude of sources. Companies that implement achievement metrics such as Key Performance Initiatives tied to compensation get the most out of their investment in talent by giving them the goals, tools and incentives to produce superior business results.
So when times get tough, the one expense you absolutely can’t afford is a de-motivated workforce. Organizations undergoing restructuring efforts need proper training and guidance to ensure the employees remains motivated, energized and challenged to attain market domination.
* Energize de-motivated employees
* Reduce pressure in the workplace
* How to deal with fear factors (boss fear, team mates, customers etc etc)
* Direct your team to decide to adopt what attitude to be top performers
* Realign team around organizational priorities
The payback you get by revitalizing your work force is staggering:
* A positive workplace environment
* Enhanced sales and efficiency
* New and exciting opportunities emerge
The lack of information about critical operating costs is a major reason why so many companies have been slow to adopt distributed or flexible work programs. The last several months in the global financial markets have shown us that investment decisions made with less than sufficient information which can be disastrous for business organizations.
Nawaz is a Webmaster at Starling Group
The Three D’s – Investment Strategies Of 2009 May 6, 2009
Posted by buyouts in Investment.Tags: Investment Strategies
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Approximately 30 trillion US dollars in global wealth evaporated during 2008. GCC investors were not excluded from the fray. The prevailing sentiment of the past decade was that the region’s oil resources would keep the GCC economies on an unperturbed expansion. Ultimately what has happened, the plunging economies have led to an abrupt drop in demand. The subsequent commodity price fall was exacerbated by speculators (hedge funds) clamoring for the doors. The oil and other industrial commodity producers will take time to adjust to the reality. That means adjusting revenue expectations, rationalizing head count and justifying exploration projects based on unsustainable price assumptions.
Similarly, investors are righting the directions of their personal ships. They are de-levering and taking shelter in defensive sectors like health care, infrastructure and food. Without a doubt, a critical factor to the market turnaround will be corporate and investor confidence in the global economies. With millions joining the unemployment ranks, the magnitude of bailouts increasing and the proliferation of recession globally – all the world needs is a pandemic to bring what little momentum was building to a grinding halt Assuming that fear is controlled and the ramifications of the swine flu outbreak are manageable, there are three main themes investors might should embrace as they build their investment strategy:
1) De-lever: with credit card rates above 20%, reducing debt is the best guaranteed return available
2) Choose defensive sectors: healthcare, basic consumer goods (food, hygiene, entertainment) and infrastructure (given government spending plans) will provide solid though not sexy cash flows and returns to investors
3) Don’t try to time the turnaround – dollar cost average your way back into the market. There may be some volatility, but 3-4 years from now, you’ll have a cost basis that will be the envy of your bowling team.
Good strategies, discipline and patience can safeguard assets and enable you to accumulate wealth. When everyone is afraid to invest is when you want to be building your foundation in the market.
Nawaz is a Webmaster at Starling Group
Impact of the Global Credit Crisis April 30, 2009
Posted by buyouts in Investment.Tags: Credit
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The GCC economies had been impervious to the global credit crisis for the better part of 12 months. While many people believed that the Middle East’s oil wealth would protect their economies from the crisis, these expectations have proved baseless. The falling equity values impaired sovereign wealth funds and lack of access to credit derailed numerous grandiose property development plans leaving some skylines littered with idle cranes. Economists predict the current conditions will stable and persist for the most of the remainder of the year. The end of this year (2009) through 2010, capital market conditions are expected to stabilize and improve. In this crisis no country is an island, as even Australia recognized its economy was in recession. Virtually every market of the world has experienced sharp declines save for the one uncorrelated market that posted positive returns, the Tehran Stock Exchange. Enough said.
The current situation finds the world economy trying to establish a base from which to grow supported by the most massive, concerted global government economic intervention in the history of the world. The bailouts and stimulus packages to date have targeted banks and countries and the auto industry. Yet as the unemployment percentage surges into double digit numbers, the consumer who was footing the tax bill will move from being a tax payer to recipient of tax benefits; credit card payments will laps, mortgages lost. The cascade downward will continue as more business will contract, more foreclosed houses in the market and higher credit hurdles and terms for new homeowners. The impact of a global shutdown due to swine flu could well trigger a cataclysmic economic freefall that even threatens the stability of longstanding democracies.
Given this backdrop, the question is, ‘what’s the best strategy to employ to capitalize on this economic imbroglio?’ The answer, my friend, is that ‘cash is king or queen if you prefer.’ Even with that, knowing which currencies to hold is also a critical analytical exercise. Several countries have individual private banks with outstanding notional debt that exceeds their country’s GDP! We recommend a basket of currencies that overweight natural resource backed economies such as Canada and Australia. Sometime next year, those patient investors holding cash will be plundering egregiously under priced assets boasting global brands and predictable cash flows.
Nawaz is a Webmaster Starling Group
Financial Recovery & Growing Risk April 20, 2009
Posted by buyouts in Investment.Tags: Finance
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The year 2009 will test the patience of GCC investors as local economies are challenged to maintain the growth rates of recent years that were propelled by oil revenues. The UAE is likely to see a tightening while other countries, especially Saudi Arabia may follow suit. On the other side, leading global economies of the world are still showing no signs of recovery. The US, considered to be largest economy in the world, has been in recession since December 2007. The UK economy is even worse than the Euro zone. And in Asia, the Japanese economy stands on the edge of yet another lost decade.
Meanwhile, the GCC region has united more with the rest of the world since the correction in oil prices. International investors are asking themselves how well the GCC is prepared for such an environment, although the impacts of recession have been slow to reach the GCC. By putting these facts into viewpoint and we come across with an interesting revealing that the current financial measures may help some companies through these very difficult times. So what does that mean for investors? Most importantly, investors should remain careful in structuring new investment positions. Emerging markets not only need a stabilization of the global financial markets but also a significant recovery in investor appetite for risk. The integrated financial markets and lower financing costs have been vital drivers of economics expansion in the region. Meanwhile with situation like this, investors are sitting passively on the sidelines waiting & looking for probable signs of recovery.
Private Equity Focus In 2009 April 14, 2009
Posted by buyouts in Investment, Private Equity.Tags: private equity firm
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Private equity as a source of capital for evolving companies has seen tremendous growth in the MENA region during the last few years. MENA focused mergers and acquisitions activity has grown from less than $4 billion in transactions in 2002 to over $30 billion in 2007. Yet 2009 has brought a lot of angst for investors across all assets classes and private equity is no exception. Ironically, local industry participants do not seem overly concerned about the subdued market condition in 2009. The mood has certainly changed globally compared to 2007 when assets were quickly changing hands. Comparing Middle East Private Equity Markets with the rest of the world, we find MENA region has produced high rates of return; these will undoubtedly be under pressure in the current atmosphere.
Those private equity investment firms whose focus is on improving the performance of their portfolio companies can still achieve their targeted returns and fundraising targets despite the ongoing financial slow down. Key themes for the Middle East private equity sector in 2009;
1) Fund raising difficult for smaller players
2) Defensive sectors like healthcare, education, infrastructure and food & agriculture will
prevail as a main focus for investors
3) Minority growth capital investments not needing leverage will outnumber control buyouts
4) Focus on regional funds rather than on country specific funds to diversify risk
backed by local investors more than global institutions
Investors will gravitate to visionary and prudent managers with a solid awareness of the risks accompanying an economic downturn. It is not an accommodating environment for first time funds, managers or strategies – investors are backing experienced ‘grey-haired’ managers pursuing a disciplined strategy with decades of proven performance.
Nawaz is a Webmaster at
Starling Group
Leveraged Buyout (LBO) to Make Large Acquisitions April 7, 2009
Posted by buyouts in Private Equity.Tags: Private Equity
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A leveraged buyout (LBO) occurs when a financial sponsor gains a controlling interest in a firm’s equity and where a major % (percentage) of the buying value is financed through borrowing. The possessions of the obtained firm are often used as collateral for the borrowed money, sometimes with assets of the acquiring company. The bonds issued for leveraged buyouts normally have several trenches ranging from barely investment grade to high coupon ‘junk’ because of the major risks involved. In today’s financing markets, even the most prestigious LBO firms have had difficulty financing transactions leading to a dearth of deals and some say the death of the LBO industry as we know it.
Historically, LBO funds made huge acquisitions of global behemoths valued at tens of billions of dollars borrowing as much as 90% of the value from banks. The banks would syndicate the loans and sell them to other sophisticated financial institutions such as pension funds and endowments. The bank financing the transaction would justify the debt levels based on the cash flows of the acquisition target and their ability to make interest and principal payments. Senior more secured ‘mezzanine debt’ might be offered to investors at LIBOR (London Interbank Offer Rate) + 700 basis points while the longer term unsecured tranches (the junk) might be sold at LIBOR + 1200 basis points.
In the halcyon days of yore (circa 2006), the LBO funds would often quickly take operating profits of the company and pay themselves a dividend covering their investment, effectively leaving them with a free call option and all the risk transferred to the bondholders – and the employees and taxpayers. Like most examples of excess in the capital markets, the pendulum has dramatically swung the other way. Gone are the days of inebriated, covenant-light debt. In fact, the banks aren’t lending at all. The best of the breed have gone out of business forever altering the LBO landscape.
Nawaz is a Webmaster at Starling Group
Private Equity Investment March 26, 2009
Posted by buyouts in Investment.Tags: Private Equity Investment Partners
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Private equity investment is money invested in companies that do not trade on the public stock markets. Private equity investments run the scope of corporate finance strategies from financing new companies to infusing capital in established companies. Channels that include private equity include: leveraged buyouts, venture capital, real estate & special situations. Private equity fund managers negotiate acquisition prices and terms to often obtain significant control of billion dollar ventures. They take a vigorous role in monitoring and directing the companies in which they invest. They frequently change management to ensure their strategic plans are implemented forcefully and efficiently under 100 day plans. This provides them the opportunity to enhance returns by directly influencing the company and eventually creating value. While private equity investments typically span five to eight years, quick flips of two years or less are not uncommon. Here’s a quick idea to some of the other investment options.
Mutual Funds; a mutual fund is ideally a professionally managed pool of cash from a group of investors. A fund manager invests your funds in securities, including stocks & bonds and decides the right time to buy and sell adhering to the fund’s stated investment objective (eg, capital preservation, growth, income, etc.)
Savings Accounts; along with mattresses are a fine place to keep your crisis funds.
Money Market Accounts; generally make somewhat higher interest than a savings account but still permit easy access to your funds.
Bonds; when you buy bonds you basically loaning money to a corporation for a definite period of time, known as term. The bond certificate promises that the issuing body will pay you back the principal on a particular date with periodic fixed interest payments at the coupon rate.
Stocks; similarly when you purchase stocks, you technically own a piece of a company’s assets. If the company performs well, you may receive intermittent dividends and be in position to sell your shares of stock at a profit, generating a tax liability in many countries.
Survival In Financial Recession March 23, 2009
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Business standing firm during a recession is no easy thing. Cash is stiff, and for most businesses this is a nightmare which adversely affects productivity because of the on going global financial melt down, and the cycle continues. Now the first solution to surviving a recession is to understand that it will be over shortly. In the past we have seen recessions lasted for 6 to 18 months, but it seems like to be stay for a long time. By setting up basic guidelines businesses could perform well even in this time, for e.g….. If your finances are tight, resist the urge to spend on anything not vital – wait until the recession has almost ended and prices are still favorable. On the other hand if you feel to have a little extra spending money, so presumably it’s a time for fine deals. Many businesses need to accelerate sales, so they will be offering their best deals. Analyze the whole offer, compare against competitors and then buy. Remain chill and stress-free. If you’re striving financially, consider the millions out of work! Likewise for business, the foremost thing is to monitor progress of accounts closely, don’t spend any excess and keep alert to customers unable to pay bills. Once you’ve decided on a course of action, then follow that policy and don’t worry about market volatility. Keep focused on the long-term plan. It’s your money managers job to analyze the status of your accounts and propose changes if required to keep on track. Even so, make sure your investment advisor is registered with appropriate authorities and audited by a reputable firm annually. And never put all your eggs in one basket. But you know that. At end the last step is to monitor growth. In other words evaluate the process each quarter and updating your records and adjust your plan accordingly. This procedure will help’s you to reach your goals.
About Private Equity March 11, 2009
Posted by buyouts in Private Equity.Tags: Private Equity
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Private Equity is where the ownership of the company is in private hands – hence they do not trade publicly on a stock exchange and are not required to file public reports. As there is no direct market for trading, these investments are suitable for investors who can withstand illiquidity for as long as a decade. Opportunities related to private equity investment are usually more suitable for big institutional investors such as pensions and endowments with the time and resources to assess the possible risks and profits, and the tolerance to wait many years to make finest use of investment returns.
There are mainly 3 types of private equity funds:
Buyout & Acquisition: The private equity buyers typically acquire 100% of a company, take it private often leaving a small incentive slice for management. Thefirm usually implements a new business plan and frequently changes management to improve a firm’s monetary results.
In Venture Capital, the private equity fund frequently acquires a minority share of an early stage company whose products and services have yet to penetrate the markets on a grand scale. While the vast majority of these technology, internet and healthcare types of companies fail to produce results, one or two hits (Yahoo!, Skype, Sun Microsystems) can produce enormous returns. .
Special Situations funds include several categories that don’t quite fit into the other two buckets including Mezzanine and Distressed debt, Oil & Gas, Secondaries and sometimes Real Estate.
In the end, Private Equity Funds are a brilliant investment option for portfolio managers seeking to diversify their holdings to include assets not
highly correlated with the public markets. For institutional investors such as pensions and endowments as well as savvy investors who can withstand heightened risk and illiquidity, private equity has the potential to generate compelling returns.
Private Equity Funds - MBO & LBO 