What Is Optimal Capital Structure?

Andrew Stolz

Definition of Optimal Capital Structure. The optimal capital structure of a firm is the right combination of equity and debt financing. It allows the firm to have a minimum cost of capital while having the maximum market value.

M&A Deal Terms: Average Capital Structure

Exit Strategy

The following chart from GF Data shows the average capital structure over the past 5 years for middle market business acquisitions. The post M&A Deal Terms: Average Capital Structure appeared first on Exit Strategies Group, Inc.

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VICI Properties: Creating Value from the Ashes of Caesar’s Demise

Harvard Corporate Governance

Academic Research Bankruptcy & Financial Distress Comparative Corporate Governance & Regulation Institutional Investors Bankruptcy Capital formation Capital structure Distressed companies Hedge funds IPOs REITsPosted by William Ferguson (Ferguson Partners), David F.

The Single-Owner Standard and the Public-Private Choice

Harvard Corporate Governance

Academic Research Comparative Corporate Governance & Regulation Mergers & Acquisitions Securities Litigation & Enforcement Capital structure Delaware articles Delaware law Fairness review Fiduciary duties Merger litigation Mergers & acquisitions Ownership Property rights

The Quality of Earnings Information in Dual-Class Firms

Harvard Corporate Governance

Related research from the Program on Corporate Governance includes The Untenable Case for Perpetual Dual-Class Stock (discussed on the Forum here ); The Perils of Small-Minority Controllers (discussed on the Forum here ); and Keynote Presentation on The Lifecycle Theory of Dual-Class Structures (discussed on the Forum here ), all by Lucian Bebchuk, and Kobi Kastiel.

Mineral Aggregator Valuation Multiples Study Released

Auto Dealer Valuation Insights

Mercer Capital has its finger on the pulse of the minerals market. Due to a variety of corporate structures (including master limited partnerships and Up-Cs) and complex capital structures (including preferred equity and non-traded.

Family Business Director’s Reading Roundup

Auto Dealer Valuation Insights

Here at Family Business Director, we are focused on the numbers of family business: measuring and assessing financial performance, establishing dividend policy, setting capital structure, making capital budgeting decisions, and structuring shareholder redemptions.

Mineral Aggregator Valuation Multiples Study Released

Auto Dealer Valuation Insights

Mercer Capital has its finger on the pulse of the minerals market. Due to a variety of corporate structures (including master limited partnerships and Up-Cs) and complex capital structures (including preferred equity and non-traded.

Executive Stock Options and Systemic Risk

Harvard Corporate Governance

We expect to find a positive relationship because the highly levered nature of banks’ capital structure should encourage the pursuit of activities that could entail systemic risk.

Weekly Roundup: July 1-7, 2022

Harvard Corporate Governance

Tags: Bankruptcy , Capital formation , Capital structure , Distressed companies , Hedge funds , Institutional Investors , IPOs , REITs.

Weekly Roundup: April 29-May 5, 2022

Harvard Corporate Governance

Tags: Accounting , Agency model , Capital structure , Cash flows , Dual-class stock , Financial reporting , Information environment , Restatements , Shareholder voting.

Weekly Roundup: July 29-August 4, 2022

Harvard Corporate Governance

Corporate Human Capital Disclosures: Early Evidence from the SEC’s Disclosure Mandate. Tags: Disclosure , ESG , Form 10-K , Human capital , Regulation S-K , SEC , SEC rulemaking , Securities regulation , Sustainability. Posted by the Harvard Law School Forum on Corporate Governance, on Friday, August 5, 2022 Editor's Note: This roundup contains a collection of the posts published on the Forum during the week of July 29-August 4, 2022.

What is the Modigliani–Miller Theorem?

Andrew Stolz

The theory suggests that a company’s capital structure and the average cost of capital does not have an impact on its overall value. . It doesn’t matter whether the company raises capital by borrowing money, issuing new shares, or by reinvesting profits in daily operations.

Why Convertible Notes have an effect on IRC 409A Valuation?

Veristrat

In recent years, many small companies have utilized convertible notes instead of preferred stock to raise money from angel investors and venture capital firms. Why convertible notes should be properly structured? Why Convertible Notes effect on IRC 409A Valuation? About 409A Valuation.

EXCLUSIVE: Janus CEO Ramey Jackson Looks Back At First Year As A Public Company

Benzinga

Since we went public over a year ago, we've simplified our capital structure, acquired our largest competitor DBCI and purchased a company called Access Control Technologies.

Global Investment Manager & Insurance Company: Vote FOR Appraisal

Appraisal Rights

The Principal Funds, a provider of a suite of investment products including ETFs and mutual funds, recommends voting for appraisal rights in its proxy guidelines.

How to Avoid Chapter 22 in Restructuring Work for Energy Companies

Value Scope

The cash flows we isolate are tested for their ability to support debt, the new capital structure of the restructured firm. Click to Download: How to Avoid Chapter 22 in Restructuring Work for Energy Companies. Executive Summary. Issue.

Rolling Back Dodd-Frank: Investors’ and Banks’ Responses to Financial Market Deregulation

Reynolds Holding

Dodd-Frank created a new financial regulatory landscape with intensified federal oversight and an extensive set of regulations on banks, such as stress tests and stricter capital, trading, loan, and mortgage underwriting standards (Acharya and Richardson, 2012; Richardson et al.,

Power & Utilities Investment Banking: How to Turn Yourself into an Electrified ESG Warrior

Brian DeChesare

Companies tend to offer high, stable dividend yields, and they finance their massive capital expenditures primarily with debt , with the highest leverage ratios of any industry outside of financial institutions. If they were, lenders wouldn’t accept 50% debt / total capital ratios.

Review the concept of WACC

Andrew Stolz

Weight average cost of capital (WACC) is a calculation of a firm’s cost of capital which includes all sources of capital such as common stocks, preferred stocks, and bonds. A firm uses a mix of equity and debt to minimize the cost of capital.

Beta 52

How to Value My Business to Sell

Sun Acquisitions

Your business’ capital structure makeup. How much is your business worth? Business valuation, according to the Corporate Finance Institute , is the “process of determining the present value of a company or an asset.”. It’s not how much you think or hope the business is worth.

Everything about Share Buybacks

Andrew Stolz

This usually happens when a company is making a deliberate and significant change to its capital structure. One significant benefit of buybacks for a country’s capital markets is that low-yielding, excess cash is returned to investors.

Appraiser Newsroom - Untitled Article

Appraiser Newsroom

Tom has extensive experience with a variety of fixed income and derivative products, such as interest rate swaps/swaptions, structured products, credit/FX/commodity derivatives, bonds/loans, convertible debt, warrants, and allocation of enterprise/equity values across simple and complex capital structures. He has performed valuations of securities along the entire capital structure including senior debt, subordinated debt and complex, multi-class equity structures.

What is Weighted Average Cost of Capital (WACC)?

Andrew Stolz

Definition of Weighted Average Cost of Capital. The WACC is the average cost of raising capital from all sources, including equity, common shares, preferred shares, and debt. What Impacts the Weighted Average Cost of Capital? How to Calculate the Weighted Average Cost of Capital?

DEBRA, next big tax reform in Europe?

Simply Treasury

The idea is not new to encourage companies to increase their capitalization and reduce their bank debt (partly through more recourse to the capital market - CMU project). The CMU aims to better balance bank financing against capital market financing.

Moonshots

Reynolds Holding

The problem is that each of them requires a moonshot – a project to commercialize a new technology that requires billions of dollars of capital over a decade or more. A startup’s capital structure solves the motivation problem.

M&A Terms Every Business Owner Should Know

Class VI Partner

Capitalization Table or Cap Table The Cap Table is a table or spreadsheet that illustrates the ownership breakdown of a company: who the owners are, what percentage of the company they own, and at what valuation. Senior Secured Debt occupies the safest portion of a company’s capital structure.

Credit Hedge Funds: Full Guide to the Industry, Strategies, Recruiting, and Careers

Brian DeChesare

The three traditional credit risks are default risk , credit spread risk , and illiquidity risk , and with structured credit , there’s also default correlation risk. Structured Credit – Now you’re buying or selling pools of similar debt obligations rather than single securities or derivatives.

Beta 52

Where Should You Start Your Value Creation?

Value Scout

It involves a thorough analysis of its capital structure, management, earnings, assets, customer base, products and services, brand, and much more. Value creation is fundamental to every business, be it a company looking to grow or the one going to market.

Del. Supreme Ct. Arguments Go Over Operative Reality, Expert Credibility, and Standard of Review

Appraisal Rights

The Delaware Supreme Court heard argument on January 13th in the SourceHOV case, with interesting issues on the proper standard of review, the concept and application of operative reality, and expert credibility coming up.

Understanding Business Valuation: Why & When You Need One

GCF Value

The business valuation will also likely consider additional factors: The capital structure of the business Prospects for future earnings The market value of physical assets. Business Valuations are critical for sale, transition, and business planning. Steve Mize, ASA, November 18, 2020.

Beyond the Twilight Zone: The Restructuring and Resurrection of Zombie Firms

Reynolds Holding

Restructuring is a complex and multi-dimensional process that involves a range of actions affecting operations, capital structure, and governance. The existing theories of zombie lending largely rely on regulatory capital requirements (Caballero et al., These findings have potential implications for managers, capital regulators, practitioners, and policy makers in preventing the creation of zombie firms. Insolvency Regimes, Zombie Firms and Capital Reallocation.

Leveraged Buyouts

Andrew Stolz

A typical prototype of LBO target is a company from a mature industry with a clean balance sheet with no or low amount of outstanding debt, strong management team and potential cost-cutting measures, low working capital requirement, low future CAPEX requirements and with feasible exit options.

Do Hostile Restructurings Mean a New Identity for the “Official Committee” in Bankruptcies?

Reynolds Holding

18] Certain features of modern-day distressed capital structures exacerbate this problem. Marble Ridge Capital: The Story Behind the $1 Billion-Plus Legal Battle , Fashion L. July 31, 2020, was an ill-fated day for financier Dan Kamensky. It began on a bright note, as his billion-dollar hedge fund stood to profit from a possible settlement in Neiman Marcus’ bankruptcy. [1]

New Pubcos Should Consider Defensive Health in Light of ISS/GL Recommendations

Cooley M&A

So far in the 2017 proxy season, ISS is almost universally recommending against all director elections at companies with a supermajority vote requirement to amend the company’s bylaws or charter, a classified board structure or a multi-class capital structure.

Private Equity Mega-Funds: The Best of the Best?

Brian DeChesare

Recruiting is fast, highly structured, and open only to select candidates. And if you’ve been a consultant at one of the top three firms (MBB), you might have a chance at one of the PE firms known for hiring consultants , such as Golden Gate Capital.

Oil & Gas Investment Banking: The First Victim of the ESG Cult?

Brian DeChesare

An understanding of MLPs (Master Limited Partnerships), including why many Midstream companies use this structure and why some have switched away from it. Capital Expenditures – How much are companies spending to find new reserves and to maintain their existing production?

Activist Hedge Funds: The Superhero Offspring of Private Equity Firms and Normal Hedge Funds?

Brian DeChesare

The problem could be almost anything, but it’s usually related to: Operational Underperformance – For example, peer companies have generated Return on Invested Capital (ROIC) figures of 10-15%, but this company is lagging behind at 5%, which is well below its WACC.

The "live" stress test of the entire financial system

Simply Treasury

A live exercise is always better than any test. Are we not experiencing a “live” stress test, never imagined or conceived by a human brain, of a major crisis? At inception, it was certainly a health or biological crisis, which also quickly generated financial consequences.

Delaware Finds Stockholder Claims Against SPAC Fiduciaries Subject to Entire Fairness Review

Cooley M&A

SPACs are public companies that raise capital for the express purpose of merging with a private company and taking it public (referred to as the “deSPAC transaction”). SPACs tend to adhere to a similar capital and governance structure, and the SPAC involved in this litigation, Churchill Capital Corp. The Multiplan opinion addresses several issues inherent to deSPAC transactions, and the SPAC structure more generally.

Appraiser Newsroom - Untitled Article

Appraiser Newsroom

Mr. Beaton h as written and spoken extensively on valuation techniques for companies with complex capital structures and has been a designated member of ASA for 29 years. Crow , ASA, CFA , is president at Mercer Capital. Tweet.

Distressed Acquisitions – Key Considerations

Shephard Mullin M&A

Just below the surface, however, lie significant issues that potential purchasers must consider when pursuing the acquisition of a distressed company out-of-court, including: Structure. The structure may be dictated by or result in significant tax implications triggered by a sale.

Appraiser Newsroom - Untitled Article

Appraiser Newsroom

He provides analysis and expert testimony in complex disputes as well as performing valuations for purposes of transactions, capital raises, corporate planning, financial reporting, disputes, and litigation. Christopher Mercer , FASA, CFA, ABAR is Chairman at Mercer Capital. Daniel Callanan , ASA is Managing Director at Prairie Capital Advisors, Inc. Michael McGinley , ASA, CVA is Managing Director at Prairie Capital Advisors, Inc. Tweet.