Driving the Capital Agenda - Raising Capital - Ernst & Young - Global

Raising Capital

A company’s ability to raise capital quickly and effectively is integral to its growth potential and financial well-being. This is true in good times and in bad.

Whatever the motivation for raising capital, companies can access new funds more effectively if they have planned ahead. They should know how and where they could access capital, if they need it.

The key is taking a holistic view of the company’s capital needs – looking at their operations through the eyes of potential lenders and investors.

Companies prepared with that perspective will improve their access to capital and the terms on which capital is offered. Time invested in evaluating potential capital sources in advance may be repaid many times over.

• Evaluating capital needs
  Companies need to identify future capital needs early if they are to secure adequate access to funding at the lowest possible cost. Regardless of how the capital will be used — to finance organic growth, fund an acquisition or restructure a balance sheet — companies should conduct an ongoing assessment of their capital needs.

•  Divest to invest
  Companies are in the best place to dispose of assets effectively when they can do three things: be clear about future asset cash flows; identify potential buyers and tailor information to their needs; and deal with any potential risks or action points that a likely buyer or lender might raise.

• Rethinking your “core” assets
  In today’s constrained capital conditions, we are seeing an increasing number of organizations take a fresh look at the dividing line between core and non-core assets. They are willing to sell what they may once have considered prime assets, if they cannot source extra capital on attractive terms or if they have a better use for that capital.

• Alternative capital instruments/structures
  Today’s capital market opportunities range from high-yield instruments to convertibles or similarly structured securities. Companies can achieve their financing goals more easily, and at lower cost, if they raise funds via the kinds of securities and structures that are in demand in the market.

• Reinvigorating the balance sheet
  Changing market dynamics have created additional financing options. Companies can access a range of sources, both traditional and non-traditional, to adjust equity ratios, lengthen debt maturities or achieve any number of objectives.

• Buying and funding locally
  We are seeing an increasing number of companies finance acquisitions with capital raised in the home market of their target asset. Likewise, companies that are looking to buy an emerging market asset should explore the possibility of raising capital on a local or regional stock exchange.

• Financing infrastructure
  Demand for infrastructure projects is on the rise. On the one hand, many nations are currently directing enormous sums into public stimulus programs. Meanwhile, many others, in the throes of austerity measures, will be placing public works up for privatization.