Leveraged buyout. A leveraged buyout (LBO) is when a company or single asset (e.g., a real estate property) is purchased with a combination of equity and significant amounts of borrowed money, structured in such a way that the target's cash flows or assets are used as the collateral (or "leverage") to secure and repay the money borrowed to purchase the target-company/asset. Since the debt (be it senior or mezzanine) has a lower cost of capital (until bankruptcy risk reaches a level threatening to the lender[s]) than the equity, the returns on the equity increase as the amount of borrowed money does until the perfect capital structure is reached. As a result, the debt effectively serves as a lever to increase returns-on-investment. LBOs are a very common occurrence in today's "Mergers and Acquisitions" (M&A) environment.
The term LBO is usually employed when a financial sponsor acquires a company. Diagram of the basic structure of a generic leveraged buyout transaction Characteristics[edit] History[edit] Share Incentive Plan. The Share Incentive Plan (the ‘SIP’) was first introduced in the UK in 2000. SIP's are an HMRC (Her Majesty's Revenue & Customs) approved, tax efficient all employee plan, which provides companies with the flexibility to tailor the plan to meet their business needs. SIPs are becoming increasingly popular with companies that want to engage their workforce and recruit and retain key employees.
From 6 April 2014, HMRC approval will no longer be required for a SIP to obtain tax benefits, instead an employer is required to self certify that the SIP meets the requirements of the relevant legislation. Accordingly from 6 April 2014, a SIP should no longer be referred to as an HMRC approved plan. There are 4 main elements to the SIP from which companies can choose to use one or more of the following: • Free Shares • Partnership Shares • Matching Shares • Dividend Shares Free Shares[edit] Partnership Shares[edit] Contributions from salary can be accumulated for a period of up to 12 months. Sharesave. Incentive stock option. Incentive stock options (ISOs), are a type of employee stock option that can be granted only to employees and confer a U.S. tax benefit.
ISOs are also sometimes referred to as incentive share options or Qualified Stock Options by IRS [1] . The tax benefit is that on exercise the individual does not have to pay ordinary income tax (nor employment taxes) on the difference between the exercise price and the fair market value of the shares issued (however, the holder may have to pay U.S. alternative minimum tax instead). Instead, if the shares are held for 1 year from the date of exercise and 2 years from the date of grant, then the profit (if any) made on sale of the shares is taxed as long-term capital gain. Long-term capital gain is taxed in the U.S. at lower rates than ordinary income.
Additionally, there are several other restrictions which have to be met (by the employer or employee) in order to qualify the compensatory stock option as an ISO. See also[edit] References[edit] Limited partnership. A limited partnership is a form of partnership similar to a general partnership, except that in addition to one or more general partners (GPs), there are one or more limited partners (LPs).
It is a partnership in which only one partner is required to be a general partner.[1] The GPs are, in all major respects, in the same legal position as partners in a conventional firm, i.e. they have management control, share the right to use partnership property, share the profits of the firm in predefined proportions, and have joint and several liability for the debts of the partnership. As in a general partnership, the GPs have actual authority, as agents of the firm, to bind all the other partners in contracts with third parties that are in the ordinary course of the partnership's business.
Background of limited liability[edit] Like shareholders in a corporation, limited partners have limited liability. LP members are subject to the same alter-ego piercing theories as corporate shareholders. Discounted cash flow. In finance, discounted cash flow (DCF) analysis is a method of valuing a project, company, or asset using the concepts of the time value of money. All future cash flows are estimated and discounted to give their present values (PVs)—the sum of all future cash flows, both incoming and outgoing, is the net present value (NPV), which is taken as the value or price of the cash flows in question.
Present value may also be expressed as a number of years' purchase of the future undiscounted annual cash flows expected to arise. Discounted cash flow analysis is widely used in investment finance, real estate development, corporate financial management and patent valuation. Discount rate[edit] The most widely used method of discounting is exponential discounting, which values future cash flows as "how much money would have to be invested currently, at a given rate of return, to yield the cash flow in future. " History[edit] Mathematics[edit] Discounted cash flows[edit] where Continuous cash flows[edit] Working capital. Working capital (abbreviated WC) is a financial metric which represents operating liquidity available to a business, organization or other entity, including governmental entity. Along with fixed assets such as plant and equipment, working capital is considered a part of operating capital.
Gross working capital equals to current assets. Net working capital (NWC) is calculated as current assets minus current liabilities.[1] It is a derivation of working capital, that is commonly used in valuation techniques such as DCFs (Discounted cash flows). If current assets are less than current liabilities, an entity has a working capital deficiency, also called a working capital deficit. Calculation[edit] The basic calculation of the working capital is done on the basis of the gross current assets of the firm.
Basic formula[edit] working capital = Gross Current assetsNet working capital = Current assets – Current liabilities. Inputs[edit] Working capital management[edit] Decision criteria[edit] Private equity. A private equity investment will generally be made by a private equity firm, a venture capital firm or an angel investor. Each of these categories of investor has its own set of goals, preferences and investment strategies; however, all provide working capital to a target company to nurture expansion, new-product development, or restructuring of the company’s operations, management, or ownership.[2] Bloomberg Businessweek has called private equity a rebranding of leveraged buyout firms after the 1980s.
Among the most common investment strategies in private equity are: leveraged buyouts, venture capital, growth capital, distressed investments and mezzanine capital. In a typical leveraged buyout transaction, a private equity firm buys majority control of an existing or mature firm. Private equity is also often grouped into a broader category called private capital, generally used to describe capital supporting any long-term, illiquid investment strategy. Strategies[edit] Notes: Have you created your customer pipeline? If you’re going to succeed in bringing in more employer business and more new employer business, too, you'll need to differentiate your list of customers and potential customers. A good way of doing this is to think about employers as making a journey through your customer pipeline.
Customers enter the pipeline via a wide funnel. They then travel along the pipeline. When they reach the end of the pipeline they have become your advocates and promoters. However, you need to know where employers are in the pipeline to help you to decide how to manage your relationship with them. You deal with employers in different ways depending on where they are in your pipeline.You allocate differing amounts to resource to managing your relationship with them when they are at different points in the pipeline.In marketing terms the employer enters your pipeline as a suspect. When you do your first piece of business with the employer, he or she becomes a customer. K-factor (marketing) In viral marketing, the K-factor can be used to describe the growth rate of websites or apps.[1] The formula is roughly as follows: (e.g. if each new customer invites five friends, i = 5) (e.g. if one in five invitees convert to new users, c = .2) This usage is borrowed from the medical field of epidemiology in which a virus having a k-factor of 1 is in a "steady" state of neither growth nor decline, while a k-factor greater than 1 indicates exponential growth and a k-factor less than 1 indicates exponential decline.
The k-factor in this context is itself a product of the rates of distribution and infection for an app (or virus). "Distribution" measures how many people, on average, a host will make contact with while still infectious and "infection" measures how likely a person is, on average, to also become infected after contact with a viral host.[3] Brokerage Model - THE BROKERAGE MODEL - Business, Models, Companies, Online, Bots, and Consumers. Whether a company sells products or services to consumers, other businesses, or both, there are many different ways to approach the marketplace and make a profit.
Business models, of which the brokerage model is simply one, are used to describe how companies go about this process. They spell out the main ways in which companies make profits by identifying a company's role during commerce and describing how products, information, and other important elements are structured. Just as there are many different industries and types of companies, there are many different kinds of business models. While some are simple, others are very complex. Even within the same industry, companies may rely on business models that are very different from one another, and some companies may use a combination of several different models. General business models by themselves do not necessarily map out a company's specific strategy for success.
One Internet business model is the brokerage model. Bambury, Paul. Business Models on the Web | Professor Michael Rappa. Business models are perhaps the most discussed and least understood aspect of the web. There is so much talk about how the web changes traditional business models. But there is little clear-cut evidence of exactly what this means. In the most basic sense, a business model is the method of doing business by which a company can sustain itself -- that is, generate revenue. The business model spells-out how a company makes money by specifying where it is positioned in the value chain. Some models are quite simple.
A company produces a good or service and sells it to customers. If all goes well, the revenues from sales exceed the cost of operation and the company realizes a profit. Internet commerce will give rise to new kinds of business models. Business models have been defined and categorized in many different ways. The basic categories of business models discussed in the table below include: The models are implemented in a variety of ways, as described below with examples. Things to read: Picture-1.png (1126×820) Social networking service. A social networking service (also social networking site or SNS) is a platform to build social networks or social relations among people who share interests, activities, backgrounds or real-life connections. A social network service consists of a representation of each user (often a profile), his or her social links, and a variety of additional services.
Social network sites are web-based services that allow individuals to create a public profile, to create a list of users with whom to share connections, and view and cross the connections within the system.[1] Most social network services are web-based and provide means for users to interact over the Internet, such as e-mail and instant messaging. §History[edit] The most popular social networking sites by country Early social networking on the World Wide Web began in the form of generalized online communities such as Theglobe.com (1995),[15] Geocities (1994) and Tripod.com (1995). §Social impact[edit] §Features[edit] §Emerging trends[edit]