INVESTMENT BANKERS ARE NOT VENTURE CAPITALISTS

There is a rather silly notion that–more often than not–stems from ignorance related to private, corporate investments.

That is, nearly all investment funds (private equity, venture capital, family office) and investment bankers fall within the same bucket. News flash: Investment bankers are not venture capitalists OR private equity investors.

Very few middle-market investment banks invest using their own funds. Very few have their own investment vehicles and, when they do, they typically are less inclined toward early-stage venture capital deals. Most private equity funds are interested in risk-sheltered, boring deals in steady-state sectors. Valuations, business models, and investor types are all differentiating factors between investment bankers and venture capitalists. Here we will discuss some of these in more detail.

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BUSINESS VALUATIONS

There is a difference between a venture capital valuation and a valuation for M&A. One often bases assumption on forward-looking potential, while the other uses historical performance. VCs use pre and post-money as the basis for the “valuation” while the other looks at some multiple of the historical cash-flows, typically based on industry comparables. Both play the diversification game very differently and therefore treat business valuations very differently as well.

Venture capitalists want the lowest valuation with the lowest amount of capital infused for the associated risk–except in cases when they need to place funds and they have the opportunity to feed a unicorn.

Investment bankers are apt to push for the greatest amount of capital input and the highest valuations possible. Their commissions move in-step with both of those metrics. In fact, when investment bankers do work with venture capitalists on behalf of a client, they are typically at odds with them. There are some venture capital firms that refuse to pay the fees of intermediaries. It’s a picky mentality, that is not exclusively the curse of venture capitalists, but had among private equity firms as well.

ADVISING IS NOT INVESTING

In the valuation differences discussion above, we are speaking as though the investment bank itself directly invests in deals. While many investment banks have their own investing funds, most in the middle-market investment banking firms do not directly invest. They are typically the connecting link between buyers/investors and the issuers/sellers. They advise clients on the nuances of capital transactions (e.g. buy-side M&A, sell-side M&A and debt/equity capital infusions). They are not fiduciaries of investor funds. They do not have a investment “thesis” or “mandate.” Most are brokers and intermediaries, advising clients on their own transaction(s) with capital sources, they are not investors themselves.

Bulge-bracket banks differ here, but the general advise or invest rule holds true for most in the mid-market.

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APPLYING FILTERS

Fewer investment bankers work with startups than do venture capitalists. Most bankers like to see substantial revenues (again, the bigger, the better). Why? This is how investment bankers ensure they are able to truly take both front-end and back-end fees for the work they do. That’s not to say investment bankers are more picky than venture capitalists. Both rightly apply stringent filters on potential deals. They simply have different filters to keep out the riff-raff. As you might imagine, we receive an inordinate number of capital raise requests. So many, in fact, that I have automation email chains set up using appropriate tags as the trigger in our marketing automation and CRM system. The tag I regularly use is #RaiseCapital.

Both investment bankers and venture capitalists will put off phone calls, NDAs and “presentations” from companies until they know whether or not there is real meat on the bone or potential proof in the pudding. Such filters should be expected. If a company is unwilling to jump through the hoops, then they become one of the many self-filtered deals.

WHAT WE ARE AND WHAT WE ARE NOT

Investment bankers are advisors, intermediaries, and brokers. They are rarely active direct investors, venture capitalists, private equity investors. If an investment bank invests directly, they typical do so through investment vehicles run by separate teams than those who manage the processes of their capital transactions.

The perfect example of “what not to do” comes from a request we had this week. The message included name, email, phone and location with the following text: “Need a loan.”

In the regulated financial services world, investment bankers are required to following “Know Your Customer” or KYC rules, so as not to provide investing advice to products unsuited for various investor types. While I would not assume the same scrutiny would be applied to company issuers looking to transact in some way, it would be very helpful if issuers applied some form of “Know Your Investor” principals to their outreach.

The more you know, the less you will look foolish and the more likely you will be to get a deal done with the right investor group. In fact, that’s the reason most companies hire an investment banker in the first place.

About ALCOR Mergers and Acquisitions

Alcor M&A is a leading advisory firm providing financial services with an emphasis on customized solutions in the areas of Investment Banking, Corporate Financing, M&A advisory, Joint Venture Advisory, Private Equity, Debt Financing  and  International Business Development.  These Services leverages insights,  relationships and a culture that emphasizes a strong orientation towards excellence.

For additional information on how ALCOR MNA can help you Grow your Company, Complete the Enquiry form One of our representatives will contact you within one business day.  

www.alcormna.com

ALCORs Growth Solutions for Business Helps Corporate Companies in the Areas of Investment Banking, M&A, Private Equity and Corporate Finance.

ALCOR provides a one-stop solution in Investment Banking with world-class corporations and companies as its clientele. ALCOR expertise spans the spectrum of finance - Mergers & Acquisitions, Equity Financing, Debt Financing, ECB, Financial restructuring, and investment banking advisory. ALCOR has footprints across the globe and an extensive presence in India with over 48 regional offices. ALCOR serves a wide cross-section of verticals, some of which are the following: Automotive, Power, Telecom, Electronics, Software, Real Estate, and Education.

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True to its global stature as a leader, ALCOR's business philosophy is driven by highest levels of integrity and honesty at the heart of business. ALCOR obeys and complies with the rules of the land. ALCOR’s erudite Directors are from Harvard, Oxford and other prestigious institutions. The execution Team comprises of internationally reputed and highly experienced finance personnel.

ALCOR leverages its strong global footprint and the value of its international board of advisors to provide its clients with high growth transactions across the globe. We use our international deal-making experience to deliver customized advice to clients on each transaction. We assist clients in evaluating international and domestic Acquisitions and Joint Ventures. Global Fortune 500 companies work with ALCOR to assess suitable targets across the globe for market entry or market share expansion. ALCOR solutions include Mergers & Acquisitions, sell side, & buy side advisory, leveraged buyouts & other types of corporate restructuring. Standing aloft with over a 100 man-years in cross-border M&A advisory & independent research & experience, ALCOR, delivers maximum value from their transactions. ALCOR understands the clients' unique business needs, keeping their objectives a top priority. We work with our clients closely, often over five years, to help the client realize the value of their value creation strategy. ALCOR's wide range of product offerings are tailor-made to suit client growth requirements

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ALCOR worldwide team allows for targeted search, scenario mapping, synergy realization, and detailed road map with experience-driven cross-border M&A advisory that can be customized with minority buy-in, acquisitions, or even a 50:50 joint venture.

ALCOR uses strategic tools such as the Balanced Scorecard with tailored precision to define the following -

• Core defense
• Global customer revenue model
• Strategic high growth market entry.
• 360-degree growth model
• Intangible value proposition .Core foundation pillars
• Evolved value chain integration.Low cost global value partnerships and several other strategies.

About ALCOR Mergers and Acquisitions

Alcor M&A is a leading advisory firm providing financial services with an emphasis on customized solutions in the areas of M&A advisory, Joint Venture Advisory, Financial Advisory,  Private Equity, Debt Financing  and International Business Development. These services leverages insights, relationships and a culture that emphasizes a strong orientation towards excellence.

For additional information on how ALCOR MNA can help you Grow your Company, Complete the Enquiry form One of our representatives will contact you within one business day.

www.alcormna.com

ALCOR MNA Provides SME Fund as one of the Funding Options to Raise Capital for Your Business

ALCOR’s SME Fund invests in new or existing SME companies in emerging markets to fund seed capital or growth capital in the range of USD 250,000 to USD 10 Million.

Raising seed capital for a start-up company is challenging. Many seed funds are affiliated with a technology or an innovation, however, we at ALCOR understand the requirement of new technology or process in today’s contemporary world and potential revenues coupled with higher value returns. For leveraging the opportunity, ALCOR normally provides early capital ranging from USD 250,000 to USD 2 Million where a gestation period is 12 to 18 months.For well-established companies, ALCOR provides a tailored funding plan specifically designed to suit the client’s needs. We will work closely with the management team for several weeks to review the business plan and the strategic capital funding approach. ALCOR will provide the most advantageous deal and valuation for the investment offer and help the company grow multifold.

About ALCOR Mergers and Acquisitions

Alcor M&A is a leading advisory firm providing financial services with an emphasis on customized solutions in the areas of M&A advisory, Joint Venture Advisory, Financial Advisory,  Private Equity, Debt Financing  and International Business Development. These services leverages insights, relationships and a culture that emphasizes a strong orientation towards excellence.

For additional information on how ALCOR MNA can help you Grow your Company, Complete the Enquiry form One of our representatives will contact you within one business day.

www.alcormna.com

ALCOR MNA’s Low Cost JV Model Helps Organizations in Growing Their Revenue, Reducing Costs and Mitigating Risk

Chicago, IL – Jan 16 , 2018 – ALCOR approach is unique and self-disciplinary to ensure the client is successful. ALCOR being a global pioneer of private equity industry, our team is adept at identifying outstanding entrepreneurs and management teams of emerging businesses. We look for companies that have a clear business strategy with significant opportunities to scale up with a defendable market positioning. While we have a preference towards sectors such as Pharmaceuticals, Life Sciences, Healthcare, Consumer, Technology & Financial Services, we are happy to evaluate investment opportunities in companies in other sectors with a differentiated business model that mirrors global growth story.

We are active in the private equity market, whether advising the equity investors, management, target, or debt providers. Our practice covers not only domestic buyouts and buy-ins but also has considerable expertise advising on international transactions. The team is supported by other specialist groups within the firm. Many of our IP and regulatory partners have spent time in-house at technology or media companies, or with regulatory bodies, bringing a useful insight into the underlying due diligence of IP-rich or regulated companies.

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Low Cost JV Model: A Strategy for Emerging Growth Companies

We follow a stringent evaluation process. Having a credible business plan that supports the need for growth capital and a clear exit strategy for investors is an important business criterion. Currently, while we invest significant minority stakes in private companies, in exceptional cases we also participate in management buy-outs. Additionally, in case of an outstanding business opportunity, we are willing to participate in listed companies. ALCOR M&A firmly believes that funding is vital to economic growth and its mobilization is key to broad commercialization and expansion of innovative and disruptive products and services from early stage startups and companies. Along with an innovative business idea, strong network, and exemplary execution capabilities, access to capital is the most critical requirement for startups to flourish.

ALCOR offer complete assistance to the clients across different stages of early growth spectrum to raise capital from a host of investors, both locally as well as globally. Our thorough understanding of the private equity funding process along with our global network and execution capabilities is the foundation driving our range of services within the sphere of private equity financing. ALCOR M&A through macro research, in-house analytics and frequent industry interactions, we identify industry and socio-economic trends, local consumption patterns and need-gap opportunities on an ongoing basis. With a cumulative experience of successfully investing in over 100 growth companies, we regularly refine our investment focus based on emerging trends, sectors and investment opportunities.

About ALCOR Mergers and Acquisitions

ALCOR offers its fund management services with an investment range of US$10mn to US$500mn along with an array of investment banking services. ALCOR augmented with an elite Board of Harvard and Oxford alumni; extends its dynamic leadership for M&A advisory, buy-side & sell-side advisory, JV advisory & execution, strategic alliance, management buyouts & leveraged buyouts, Corporate Finance & Restructuring and Business Growth Consultancy. ALCOR Fund has several portfolio companies in emerging markets.

ALCOR has become one of the leading players in PE consulting, M&A, International Business Development and consulting services over last five years. ALCOR has assisted numerous clients in North America, Europe, and Asia to grow their business in organic as well as through inorganic way. At ALCOR, we advise clients across industries during different stages of capital requirements with the primary goal of offering long term appreciation of the capital. 

Joint Ventures and Partnerships – A Better Way to M & A

A lucrative way for minimizing the risk of company expansion is to pool funding options with your competitor and form a joint venture. It can typically last for either one project or a group of projects but depending upon your investment, a joint venture might bring greater ROI and will allow you to achieve your business goals more quickly so that you can take on larger projects. Typically, at the time of expansion, most entrepreneurs face a dilemma: To differentiate themselves from their competitors, they should add a new product/service, a contract or a new market twice the size they have done before. But they require huge investment for such kind of business expansion, and there is no guarantee that this investment will pay off.

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It has been seen that joint ventures are a trendy way to allocate the cost of expanding the business into new territory. A joint venture (JV) is considered to be an incorporated entity, in which each organization which is participating primarily depends for the entity’s debts and actions. However, unlike a merger, a JV is short-term and often sold or dissolved on project completion that brings both partners together. At a time, it might happen that your friend can actually be your competitor or at least, an organization is related to the same business line like supplier. Many businesses that are expanding find pooling resources with either one or more partners for creating a JV is the best way for minimizing risk while assisting each partner to boost both revenues and expertise. In any partnership whether long-term or temporary, mutual trust and compatibility might make or break the deal.

 Pros of VJs

•         The combined ROI from both venture partners is anticipated to be greater than the ROI they will be getting independently.
•          For independent small organizations, joint ventures make help them in participating on larger projects.
•         Resources from different organizations might help in achieving objectives and goals more effectively and quickly than resources from one.
•          Venture partners can get information about adopting each other’s best practices.
•         JV partners can get control on each other resources and technologies.

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 Cons of JVs

•          JV partners can get control on each other resources and technologies.
•          Entering into a JV needs the resource diversion from one’s current business.
•          There are failure risks due to compatibility problems and liability for mistakes done by partners.
•          JV is unlikely to succeed if both the partners are not committed deeply to the joint operations.

Now the question arises which comes first: the opportunity of business expansion, or the JV that will help in expansion? The situation varies in either of the conditions. You may already have product prototype but cannot afford hiring technical experts required for refining that product. Or you can also form a JV for conducting R&D activities in order to reach prototype stage. Often, organization that are involved in infrastructure projects build up a JV ahead of contract bidding, so that they can market the collective strength of venture. In an event, the JV partners fail to win the contract; they may still chase other projects together. Some rising market economies need that foreign companies build JVs as a method of giving employment, training and transferring technology. Moreover, plan on achieving the same owing diligence for a merger or acquisition. So, before signing a formal contract, both the partners must prepare the ground for that contract by drafting an agreement letter that might be formalized later into a legal contract. 

About ALCOR Mergers and Acquisitions

Alcor M&A is a leading advisory firm providing financial services with an emphasis on customized solutions in the areas of M&A advisory, Joint Venture Advisory, Financial Advisory, Private Equity,  Debt Financing and International Business Development. These Services  leverages insights,   relationships and a culture that emphasizes a strong orientation towards excellence.

For additional information on how ALCOR MNA can help you Grow your Company,Complete the Enquiry form One of our representatives will contact you within one business day.  

http://www.alcormna.com

Setting Up a Joint Venture

Currently, World’s economy is growing very fast. But for the first time, stepping in any country the most preferable form is the Joint Venture for setting up a business entity. Also, in case the business and legal environment is not known, it is advised to form a Joint Venture. A Joint Venture is joint agreements among two or more parties come together and form business or contractual relationship for executing specific business model. There are two types of Joint Ventures: Contractual Joint Venture and Equity Based Joint Venture.

Contractual Joint Venture

Wherein two or more individual or companies comes together and forms an agreement/contract for working jointly but no individual entity is build for executing the business contract. The main features of contractual joint ventures are described below:

·         Two or more organizations comes together into an agreement with a similar intention of project execution

·         Each organization or individual brings its own roles, shares and responsibilities are accordingly decided to depending upon each one’s field of expertise

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Equity Based Joint Venture

In this an individual legal entity is formed which is owned by two or more individuals who are working jointly with a similar intention.  And also decides to equally participate in the equity of entity that is newly formed. This newly incorporated entity may be in the form of LLP, Partnership firm, Company etc. In general, in this type of joint venture, the benefits as well as losses of entity that is owned together are distributed among the all the individuals or parties based on the capital ratio contributions made by them. The key features of equity-based joint ventures are as follows:

·         Shared rights by the individuals/companies involved

·         Shared management of together owned entity

·         Shared benefits and losses based on the agreement

Benefits of a Joint Venture

Two or more individual’s ownership in an organization and each and every person contribute different aspects having long-term profits in their mind. Fundamentally, everyone has found it essential to have a business partner. Likewise, in the US, business partnerships must be done legally along with proper government documentation. This process includes registration and building of a partnership agreement, describing business objectives, responsibilities, and legal liabilities of an individual. Often, business associates always want to be exposed themselves with the liabilities and risks associated with an unlimited general partnership. A limited partnership agreement might mitigate such kind of issues. Also, in limited partner’s case, both individual don’t have same no. of control over a business practices, and also don't have same level of debt exposure of the business. The specific rights along with business responsibilities of these partners should be laid out in the agreement of partnership. However, the business formation laws having limited partnerships, varies state to state.

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Joint Venture- A Good Fit for Successful Business

Joint ventures combine two or more separate business entities for undergoing on a business idea or specific project with mutual decision for successful functioning of both the businesses. In this way, both the entities only give their daily business operations rather giving whole control over their business. Both the business entities continue to function independent of each other, except the specific idea or project they have decided to run together. Every member does capital investments and put their resources, and takes the risk involved in that process. On the whole, a partnership which is in general form couples two or more persons in a permanent business relationship. In this venture, there is no operation or functioning separation neither there is any kind of limitations on the any activities or projects taken together to work for.

About ALCOR Mergers and Acquisitions

Alcor M&A is a leading advisory firm providing financial services with an emphasis on customized solutions in the areas of M&A advisory, Joint Venture Advisory, Financial Advisory,  Private Equity, Debt Financing  and International Business Development. These services leverages insights, relationships and a culture that emphasizes a strong orientation towards excellence.

For additional information on how ALCOR MNA can help you Grow your Company, Complete the Enquiry form One of our representatives will contact you within one business day.  

                                                                     
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How Debt Financing Can Help Entrepreneurs Achieve Business Growth

In today’s competitive world, serving some extra customers is much easier than growing a business. And it is fact that revenue always finds its way to incline towards working capital without leaving any extra funds for business expansion.  The best way to ensuring the growth of start-up business in order to bring on a small debt and get immediate funding utilized for upsizing your startup business. Usually, long-term debt is bad for any startup business, the right terms coupled with right loan might put your business start-up in a position for growing earnings and again pay back borrowed cash without any trouble.

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There are plenty of lending options to choose for entrepreneurs. The administration of small business all alone coordinates in funds with billions of dollars for lending small companies that aspiring to grow their business. In the hope to avoid debt all together, most of the business owners are opt for equity lending. And taking loan permits you to keep on working as the sole decision maker. Only you will be answerable for compensating the lender but with full control of the company and its profits.

Most important thing to consider in debt financing is to prepare a timetable for your business growth. As, if the business expansion happens in a couple of years, make sure that the loan does not need unmanageable payments done on monthly basis. Depending on how much cash you have borrowed, the terms are decided and where will you use this money. Most the small business lenders mainly work with particular industries and provide good rates to the right organization.

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Using Debt to Help Finance Strategic M&A

Technology companies while growing their business are mainly using debt financing for helping finance strategic Merger &Acquisitions. Acquisitions that are well executed will be a complement to these kind of companies that are focusing on their business ‘organic growth and helps in achieving critical scale-up strategy, accelerating development of the product, strengthening the competitive position and speedy market entry as well. But it can be a challenge for those companies that are yet not generating meaningful cash flow, getting right acquisition financing as the pace with which you are adapting thing matter a lot in case of M&A.

Furthermore, with plenty of debt financing solutions, first review how you can make use of effective debt for complementing several funding sources and help technology organizations in raising required capital within specific time frames needed for M&A processes. An acquisition well-executed might be a powerful tool for driving growth and enhancing investor’s value for technology-based companies. So, it’s better to take time in determining the strategy of optimal financing that will help in ensuring that your acquisition is successful.

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Most of the business owners think that just because of bad credit or any other things that lenders might have the issue with, they won’t get access to debt financing. Typically Merger &Acquisitions’ are used by companies’ for implementing value added strategies so that they can prosper and grow. M&A works off set notions of value that needs plenty of planning, negotiation, and capital investment for pulling it off. In light of investment risk and challenges, business alliances in the form a partnership, joint venture, or licensing might be viable which is to be considered according to the need. Two or more firms can set up an alliance pooling efforts together, so that value delivery can be done to the consumer as well as those who are involved in a profitable manner. Moreover, the decision of growing your startup business might be very exciting to make and can also be bit overwhelming. Consider whether the funds borrowed by you will help in generating more revenue in the coming years or not because if not, then you may be better off waiting. Rather leverage any capital infusion through which you can get into sales and marketing, with the aim of generating cash for the business in the future. And in this way, you may not require to borrow again.

About ALCOR Mergers and Acquisitions

For additional information on how ALCOR MNA can help you Grow your Company, Complete the Enquiry form One of our representatives will contact you within one business day.

                     

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