Corporate Finance - A Tool for Survival
On Thursday, October 27, 2016, the Institute for Entrepreneurship welcomed Mauro Valenti, Managing Partner of H&N Management and Consulting, for a lecture titled “Corporate Finance – A tool for Success.”
After explaining his diverse professional experience (8 years in Turnaround Management, 15 years in Private Equity, and 15 years in subsidiaries of US Corporations), Valenti presented a case study to illustrate the importance of cash flows in restructuring a struggling company.
Struggling companies, Valenti said, have two things in common: a shortage of cash (due to poor performance) and limited access to lines of credit (due to debt). Clearly, he continued, the actions to be taken in such a case are quite straight-forward: cut losses, exit unprofitable businesses and restructure the company. However, all of these actions require time, which, in finance, “is really money,” Valenti said. He continued by examining one of the tools that allowed him to obviate the need for cash: factoring. Factoring consists of “selling” Accounts Receivable to a bank, which then becomes the creditor of the customers; in other words, the company gets invoices paid immediately by the bank instead of having to wait for payment by the customers.
Valenti concluded by examining the need for cash during organic growth (for investments), before analyzing how to complete strategic acquisitions using little to no cash, but rather through capital increases and employing the differences in value between publicly listed and private companies.