Supporting companies in improving medium- to long-term corporate value by optimizing increasingly complex financial structure and shareholder composition
Capital Strategy Formulation
Solution
Changes in the business environment and growing diversity in investor values in recent years have increased the need for companies to carefully design optimal financial structures. This has made carefully managing the balance between equity capital and debt, and even revising shareholder composition and building consensus among investors, on top of seeking to balance growth strategy with financial stability, have become important challenges.
ABeam Consulting supports client capital strategy from the three angles of (1) optimizing financial structure, (2) formulating capital policies, and (3) shareholder and investor messaging. Through better capital efficiency, selection of the right class of investors and improved governance, we offer comprehensive support for maximizing corporate value.
Background
In response to changes in the business environment and greater diversity in investor values, companies need to optimize their financial structures, revise their shareholder compositions and consider flexible capital policies
As the business environment undergoes dramatic change and investor values grow more diverse, companies are facing pressure to not only revise their relationships with their existing shareholders based on their medium- to long-term growth strategies, but also to build relationships with new shareholders. Designing optimal shareholder compositions is becoming increasingly complex.
Triggered by the release of the Ito Report and the reorganization of the TSE into new market segments, demand has grown for management postures more strongly shareholder-focused. Even among listed companies, moves to flexibly revise traditional capital policies and governance frameworks are spreading.
Against this backdrop, we are seeing an increase in carve-out deals as part of efforts to reorganize business portfolios or to carry out selection and concentration, even as companies are being pressed to consider flexible and effective capital policies, including the acquisition of new strategic shareholders and, in some cases, taking on support from investment funds.
Challenges
Companies need to achieve shareholder compositions that are aligned with their strategies and formulate optimal capital strategies based on consensus among shareholders and investors, while balancing business growth and financial risk
- Optimizing financial structure while keeping an eye on the balance between business growth and financial risk
For companies to achieve sustained growth, they must properly manage the balance between equity capital and debt, and revise their capital structures to combine growth strategy with financial stability. They also need to properly plan their capital costs while making appropriate use of leverage to avoid damaging their creditworthiness through increases in financial risk from excessive borrowing or lowered capital ratios.
In addition to building flexible capital policies that take into account business expansion or M&A, it is also important for companies to seek to diversify their future means of capital raising and to keep their options open, while keeping an eye on capital market trends and relationships with financial institutions. - Designing shareholder composition aligned with strategy
When companies invest or take on certain amounts of risk to carry out their business strategies, an important challenge becomes that of identifying shareholders and investors who can share the company’s direction and vision. In particular, when imagining shareholders who can actively contribute to a company in the medium to long-term, companies need to evaluate the characteristics of potential shareholders. They should do so not only in terms of their ability to supply capital, but also in terms of whether there are any business synergies, their industry knowledge and networks, their degree of involvement in management, and their stances as investors (do they take a short-term or long-term view).
On top of that, companies also need to pursue suitable shareholder compositions that align with their strategies based on their future options for exit strategies and the nature of their governance structures, so that they can go after greater corporate value while maintaining management autonomy. - Optimal messaging to shareholders and investors
To realize the shareholder compositions that they are after, companies need to attract shareholders and investors who buy into the vision and share an interest in long-term value creation. To that end, they need to carefully craft messaging that will clearly convey their strategy and growth story to investors, based on a proper understanding of what those investors expect of companies.
Approach
ABeam Consulting supports clients in formulating capital strategy from the three angles of (1) optimizing financial structure, (2) formulating capital policies, and (3) shareholder and investor messaging.
We ensure the soundness of corporate balance sheets and construct capital compositions that are aligned to growth strategy by careful scrutiny of debt ratios and equity capital levels, identification of assets that can be moved off the balance sheet and optimization of capital costs.
In line with this, we identify the right class of shareholders, fitting with the growth lifecycles of companies, then formulate strategic capital policies. We also carry out proper messaging to appeal to target investors, so that we can promote the building of relationships that contribute to improving corporate value.
Key features
-
Support From Consultants Who Understand the Motivations Arising From the Characteristics of Investors
Our consultants, informed by a wealth of experience spanning strategy formulation to execution, accurately understand your company’s inorganic strategy and the motivations that arise from the characteristics of investors, allowing them to successfully drive your projects.
-
Strong Networks and the Discernment to Identify Synergies With Your Business
Leveraging the discernment to identify business synergies and our extensive investor network, we help clients realize strategic shareholder compositions that align with their growth strategies.
Click here for inquiries and consultations