Tag Archives: Mergers and Acquisitions

Business Articles, Capital Allocation, Executive Management, Leveraged Finance, Structured Finance

CEO’s Asset Allocation & Finance

There are Different Capital allocation strategies for CEO’s. However this post will dive into the different ways and avenues CEO’s have for Allocating Capital and what Equity vs. Debt is used for when raising Capital for growth.

Imagine your a CEO and you growing your public company, but find that your really not prepared for the capital it takes to buy a larger company. What do you do? That is a hard question to ask. However I can go through the different options a CEO has when using finance to Buy a company. And what being smart with asset allocation looks like? And what are the different options a CEO has with Leveraged Finance? Let’s get started! Uncle John Malone the Founder of Liberty Media teaching about Structured Financing below.

Did you read my post on the Six types of Assets?

Capital Allocation Chessboard

There are really only five Capital Allocation moves on the chessboard as a Chief Executive. First you have the option of investing into Research and Development or the Operations of your company. The next option is for you as the CEO to Invest into and or Acquire Strategic Assets or Companies. Next you could Issue Shareholder Dividends with Cash from the Balance Sheet. Or if your Cash is beginning to pile up like Bill Ackman’s Company Pershing Square from buying all those incredible cash flowing businesses you as the CEO have the option to implement a Stock Repurchase plan. And the very last? Pay off Debt that is causing your balance sheet to be inefficient. These are your options.

  • Invest into Company Operations
  • Acquire Strategic Assets
  • Issue Shareholder Dividends
  • Repurchase Stock with Cash
  • Pay off Debt

Did you catch my post about Special Situations Investing?

The Problem Issuing Additional Shares Diluting Current Shareholders Shares

Issuing Additional Equity Shares as a Capital Raise is foolish and blatantly unfair in my opinion to Shareholders. Because this dilutes current shareholders equity shares. In other words shareholders holding shares who are not able to provide additional capital will have their shares diluted equaling a reduction in ownership. To me that’s a touchy subject. I don’t feel that is fair to shareholders.

So what are the options a CEO has for Financing? That is a loaded question. Because we have 2 Finance Topics that need more explained real fast.

  • Structured Finance

Structured Finance is a entire topic unto itself about Finance LAW. However for todays article or post we will keep it brief. Structured Finance Refers to financing options for Restructuring a company out of Bankruptcy. You have Structured Finance options such as?

First we can share Structured Finance. What is Structured finance is all about? Financing a Business using Securitization, Tranching, Credit Enhancements.

  • Leveraged Finance

Leveraged Finance on the other hand is all about the Following: CEO’s. Pay ATTENTION!

Leveraged Finance (LevFin) refers to the financing of highly levered, speculative-grade companies. Within the investment bank, the Leveraged Finance (“LevFin”) group works with corporations and private equity firms to raise debt capital by syndicating loans and underwriting bond offerings to be used in LBOs, M&A, debt refinancing and recapitalizations.

The funds raised are used primarily for: Leveraged Buy Outs of Companies, Mergers and Acquisitions, Recapitalizations, Refi Old-Debt. If your a Investment Banking Analyst or Finance Student the links will help you find more about these different options Advisors, Bankers and CEO’s use to Finance Business’s Acquisitions or Debt.

  1. Leveraged buyouts (LBOs): Financial sponsors need to raise debt to fund a leveraged buyout.
  2. Mergers & Acquisitions: Acquirers often borrow to pay acquisitions. When a lot of debt is needed, it falls under the leveraged finance umbrella.
  3. Recapitalizations: Companies borrow to pay dividends (“dividend recap”) or to buy back shares.
  4. Refinancing old debt: There is an old investment banking adage that says “the best thing about bonds is that they mature.” Once a company’s debt matures, the company will need to borrow again to pay for the old debt.

One last part that is not obvious but crucial for CEO’s to understand. There is another method of Financing a Companies Sub-Division that may not correlate well with the Holding Companies niche in the Market Space. A way to keep finance separate is through the use of Tracking Stocks. Please read the Image below for more detailed description of Tracking Stocks.

Did you know? “Tracking stocks will trade in the open market separately from the parent company’s stock.” I was introduced first by and was educated about the use of Tracking Stocks by none other the Cable Cowboy CEO of TCI and Founder of Liberty Media Mr. John Malone.

Conclusion for CEO Finance Options

I do hope you found value in today’s post about Financing Options for CEO’s and hope you will use this new information to make better informed decisions as Public Company and Private Company CEO’s running and navigating finance. There are so many topics that evolve around the Finance Capital Markets that it would be impossible to include all available information on one post on my blog. But I would like to leave you with a very valuable nugget of wisdom from Mr. Warren Buffett.

Warren Buffett the CEO of Berkshire Hathaway always buys and invests into companies that gush cash flow. In turn his Company Berkshire Hathaway is always stacking cash and using the Treasury Markets to store that cash flow for the Balance Sheet. You see Mr. Buffett is smart enough to never place his companies extra cash inside a Bank Account at a Bank. That would be extremely inefficient and he would not receive hardly any long term value placing money into these facilities. Mr. Buffett would actually lose money over time. So he uses the Treasury markets to gain a positive interest on the cash Berkshire holds.

I hope you found value and wisdom from the information provided today. Nothing in this post is Personal or Business Financial Advice. And should be construed as strictly entertainment and the options a CEO has when considering all options for Financing. I hope you will take a page from Mr. Buffett’s book and Mr. John Malone’s Book and use what I have provided to make better and more informed decisions using the complex Capital Markets. Often times? Financing Business basics and using unsexy practices are all it takes to outperform the market as a informed CEO. Thank you.

Godspeed

JS

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Business Articles, Mergers and Acquisitions

I Interviewed The Trillion Dollar Man Dan Peña

So a few month’s back I reached out to the QLA Founder who is known online as the one and only Mr. Dan Peña. When I submitted my Questions to him little did I know his answers would be just as entertainingly colorful as his Youtube videos.

Here is the thing. I knew nothing about Dan until one of my close Mentors who himself is a Bad Ass Senior Big 4 Partner sparked my curiosity one day while on a Zoom call in September. Sure I have seen suggested videos about Dan before. But I paid them no interest. But this day I made a note and went to watch what this guy was all about. What I found was? Dan’s videos are about helping normal average non high performers to try and reach or obtain a level of Business sophistication that makes them super wealthy through a methodology called QLA.

Dan’s coaching and teaching videos are also meant to help the Entrepreneurs who struggle with sales so they have a fighting chance. And to toughen up so to speak. Dan is a Military Veteran like myself, he served around the Vietnam era and honestly as a fellow Veteran? Dan is 100% hard as fucking nails.

And so I asked him a few Questions only a Military Veteran would be able to ask. And these are colorful his answers…

Mr. Dan Peña’s Backstory

Before becoming very wealthy by taking Great Western to an IPO on the London Stock Exchange Youtube Sensation and QLA Founder nicknamed the Trillion Dollar Man Him Self Mr. Dan Peña, was busy serving in the United States Army. (DANS WEBSITE)

Dan Peña began his career as a financial analyst on Wall Street. … He went on to become president of Great Western Resources, Inc., a Houston-based oil company eventually listing his Company on the London Stock Exchange. After a Board of Directors shake up, Dan Walked away after the dust settled with a very large multi million dollar pay day. (Dan Peña Youtube Channel) Click pic for Youtube Channel.

I asked Dan many questions. But to keep this article short for all intensive purposes? Here are the answers that have the most value for you. Thank’s DAN it’s a privilege to interview a fellow Veteran.

How Dan Peña Made His Millions?

Dan Pena with 100 million dollar check

Dan Peña began his career as a financial analyst on Wall Street. … He went on to become president of Great Western Resources, Inc., a Houston-based oil company eventually listing his Company on the London Stock Exchange. After a Board of Directors shake up, Dan Walked away after the dust settled with a 400 million dollar pay day.

-QLA can it work for any veteran?

ANY VET THAT HAS TRUE COMMITMENT & FOCUS, PLUS HE NEEDS 2 BE REALLY HUNGRY!

-What is the key to becoming Successful and established as a Investor?

SUCCESS IN ANYTHING IS ALL ABOUT FOCUS!

“WARNING” IF you find profanity offensive, and if you have trouble with realizing the truth about yourself? This is not for you. DAN Will not spare your feelings. Read on at your own peril.

-Do you feel being a Combat Trained Ranger Trained Infantry Officer helped you be successful in the tough and difficult world of Investment Finance?

IN THE 60’S, WHEN I WENT THRU INFANTRY OCS, FROM DEC 1966 TO JUN 1967, RANGER TRAINING CAME AS PART OF INFANTRY OCS – BUT WE GOT NO BADGE CERTIFICATION! Ranger TRAINING WAS NOT AS LONG AS RANGER SCHOOL – BUT EXTREMELY INTENSE!

BUT NO DOUBT, IT TUFFENED US UP LIKE NOTHING IN CIVILIAN LIFE! IN THOSE DAYS, THEY LITERALLY BEAT US – PUT BATTERY CABLES 2 UR BALLS – PUSHED U OUT OF TREES WID UR ARM/LEG TIED, 2 DISLOCATE UR JOINTS – PLUS IF CAUGHT IN TERRIST TACTICS, STAKED U OUT ON AN ANT HILL & POURED HONEY OVER U – LEAVING U A COUPLE DAYS! MY BEST MAN ALMOST DIED ON SUCH A HILL!

SUCCESS IN ANYTHING IS ALL ABOUT FOCUS!

-How do you scout for talent?

GREAT POTENTIAL, LEAVE GREAT FACT PATTERNS OF PAST ACTVITIES!

-How do you acquire Deal Flow?

THRU R DREAM TEAM BOARD & R OUTSIDE LAWYERS/ACCOUNTANTS, PLUS R UR BANKS!

-Where do you see your Private Equity Group in 10 years?

WE R NOT PE! BUT QLA WILL BE AROUND 4 EVER! I HAVE BIN WORKING THE MODEL 4 MORE THAN 50YRS!

GOOD HUNTING!

Mr. Pena’s Controversial Teaching methods are honestly how you build winners. The Military Trained him for War, he trains young men at his Castle in Scotland to win.

Did you happen to catch my latest article News interview on the latest Acquisition? “HERE”

I was surprised that Dan truly does want what’s best for all people. And the straight facts are Dan doesn’t like to see weakness within his fellow Entrepreneurs. His twisted love albeit fucking twisted and dysfunctional is meant to be a Soldiers Affection in a way. You have to be a Soldier, Sailor, Airmen or Marine to understand where I am coming from. And this is why so many men who did not serve in uniform find him offensive. Business is fucking hard. And he want’s to transform you to be able to accept the ridiculous rejection you will face if your in any business. That’s why he behaves the way he does.

What is Dan Peña's Military Ranks?

Lt. Dan Peña US ARMY

Dan Peña was discharged from the United States Army at the Rank of Lieutenant

To all my fellow Veterans, Men or Women, Bad Ass Infantry or Sailors that man the Conning tower on submarines. Here is a Cheers to you. As I sign off? I hope you found this interview useful, I know I had a blast conducting it.
As we say in the Marine Corps. SEMPER FI

-DOC OUT!

JS

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Mergers and Acquisitions

Youtube’s Best Acquisition Entrepreneur Show

This morning while I was sipping my coffee Jon Stoddard’s Mergers & Acquisitions Podcast was referred by a Attorney and Im convinced it’s the best damn M&A show online. 100%! No kidding everyday I spend 2 hours after I wake up on study time learning and training for new skills. For the last month I began learning Python coding, and it seriously takes time to learn how to code. But when I opened Youtube I had a message from a New York Attorney that read? “Thought this would be helpful for you to watch in the morning as you train.” This is what I found when I clicked the link. Jon Stoddard’s Mergers and Acquisitions Youtube Show. Since I am in this small Business community I immediately stopped what I was doing and watched the video. Click picture to watch his channel.

What is Youtubes Best M&A Podcast?

According to Entrepreneur Investment Group Partner Sharp J? Jon Stoddards Youtube show about Mergers and Acquisitions is the most informative online.

Christopher Wick M&A Entrepreneur

The first video I watched was the Talented and high energy Mr. Christopher Wick who has a growing and profitable track record of making one Transaction a year. Bravo Good Sir. This is fantastic. I was immediately drawn in because the language and struggles, challenges faced by this good man was exactly the same I am facing. But in a different industry. LOL If you have not watched this youtube show with Jon and Christopher? Do it now.

There is a entire community out there that has the experience that I have been looking for. As I watched this amazing interview? I suddenly found it was if a vail of obscurity was lifted. Matters of financing transactions, finding deal flow, and more was shared generously.

Patch Baker – 100 plus Acquisitions

My second video I began devouring was Patch Baker, interestingly Patch is a former Marine veteran and has completed over one hundred Mergers and Acquisitions Transactions. Plus Patch’s company MOBIUS marketing and media is a former client and partner of juggernaut Black Rifle Coffee Company who just went public.

https://youtu.be/GLb_uAwVP2o

All this content is so valuable and helps the Entrepreneurs who are out doing exactly what they are doing begin asking the right questions. And start pursuing the right answers. Path Baker’s entire conversation on conversion rates and mathematics behind advertising and paid ad spend was eye opening. I had a inkling that this was the case. But he just confirmed to me why so many small businesses fail when placing ads on Facebook and Google. It’s truly fascinating how he went into and shared how Sir. Richard Branson quietly took over the British Virgin islands using strategy that seemed completely natural. It makes sense. I would highly suggest you check out Patch and watch his interview in it’s entirety.

Mergers and Acquisitions Stories and Experience Goldmine

In conclusion for today’s post? I would love to share that there is a entire eco system of content out there if you know where to find it. Patch Baker was saying in his conversation that going super niche is sometimes not the right play. Look at Blockbuster. In the 1990’s everybody was lining up for a chance to go super niche like this failed American brand. Evolution and change happen daily. If you don’t change and don’t keep evolving as a entrepreneur trying to improve growth and create better value in the market? It’s likely you as a entrepreneur probably won’t succeed. The lesson’s learned from this show are truly unique. So I would highly suggest if your are in the Mergers and Acquisitions space and are researching the eco system as a entrepreneur? You will one hundred percent need to watch this fantastic Youtube show by Mr. Jon Stoddard.

Godspeed

JS

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Business Articles

The Rule Of One Hundred

Robert Kyosaki “Rich Dad Poor Dad” best selling author teaches Entrepreneurs to look at 100 properties if your in Real Estate, or look at 100 Business’s if your in Private Equity before making a decision to buy. Why would I share expert advice from the ultra successful Investor Robert Kyosaki? Because I have used his advice and won! It’s that simple. Here is another reason I follow Roberts teachings and listen intently. Robert and myself are both USMC Veterans and trained Pilots, we literally have many things in common with each other like seeing the world through entrepreneur lenses. Not to mention a laundry list of other interests that intersect. His advice is 100% rock solid. This is why I listen to his advice and share his fantastic wisdom. Im going to share why this business rule and strategy could be useful for all areas of your life and how it has worked for me. And since I am naming Business Heavy Weights I personally watch. Do you know who Noah Kagan is? Look him up! I feel Noah would most likely agree a 100% with my post.

What is the 100 Rule?

Here’s the problem I see most of the time with Entrepreneurs. They expect results way to quickly and they have no strategy at all. Or they just have no patience and are quick to move on to the next project without really giving their best. However if you do decide to use this information in this blog post? It’s likely you may be impressed with the results. And this information may just change your entire life!

Many month’s ago I was driving my usual circuit of pit stops and making my way to the Plaza’s Barnes & Nobles Book store. While driving an interview video popped up of Noah Kagan the CEO of App SUMO & OK DORK and Ryan Holiday author of “Trust Me Im Lying” . If you don’t know who these fellow Entrepreneurs are? You should go watch some of their Content and Read Noah’s book. 100% They get it!! And we have similar experiences of knocking on thousands of doors and learning rejection is just apart of the process and will make you stronger. This is one thing I really love about Noah videos. He is transparent about his battles. I can relate to his experiences 100%

While Noah and Ryan were sitting at a Table on this video interview their conversation veered to a subject about the The One Hundred Rule. Your probably asking yourself What is the One Hundred rule? Im happy your thinking ahead. The One Hundred Rule is exactly this in it’s definition. Say your writing a Blog or starting a Youtube Channel or even Selling a product you made to the open market. The One Hundred rule makes it clear that in order to know if your Blog, Youtube Channel, or Product is worth pursuing and not quitting? You must write One Hundred Blog Posts, create One Hundred Youtube Videos or even Pitch the product you made to One Hundred Executives before deciding if this was worth your time to keep going? Or to quit. This same rule can be applied to Finance, M&A, and especially Business Strategy!!

The One Hundred Rule Used By Warren Buffett and Charlie Munger

If you watch Warren Buffett and Charlie Munger’s videos from the Berkshire Hathaway Annual Meetings Q&A sessions. You will hear in their answers how Warren and Charlie have both referred to looking at One Hundred Businesses before deciding which business they would like to invest in and take a official position. There must be only one explanation. They use the One Hundred Rule. I have even heard Warren Buffett refer to reading a Hundred different Annual reports in order to begin his deliberation on which company to invest in when the market was bearish. Fascinating stuff right? Yep!

How Im Using the One Hundred Rule in Mergers & Acquisitions?

If your in the Big leagues of Business your definitely not ever going to just rush into a decision of buying a business. It’s been my experience that many people will openly lie to you. They will waste your time, and they will try and deceive you along the way for their own gain. Here’s a great example. While searching for Vineyards in the Midwest as Targets to buy it became very clear very fast almost all the vineyards in the midwest are small family run farms with a very small section of vineyards on these remote country estates. They do have make great small income streams from their cash flow.

The revenue streams from these Vineyards and Wine tasting businesses relies heavily on traffic from the city’s. They rely on this traffic so they are able to stay in business. And then Corona Virus hit! That basically destroyed this cottage industry literally overnight. And many of these country vineyards and estates were put on the market by online Business and Real Estate Brokers. I had inquired about a few of these vineyards or estate’s because I could see these vineyards repurposed for maximum returns on investment. But almost every Broker I spoke with wanted to highlight the Vineyards history of profit. And market these real estate properties as turn key businesses. I don’t know about you. But investing in a business that relies on a market that has gone bust is not a attractive investment opportunity. LOL I did not buy an estate vineyard. Because I looked at One hundred Wine and Beverage opportunities. That decision and using this strategy saved me from making a bad decision.

How the One Hundred Rule is shaping my Business & Finance Blog?

As this blog continues to grow and continues to introduce new Business Strategies in Entrepreneurship, Finance, Business Strategies and more. We see I am using the One Hundred Rule to evaluate the optimal direction I as the writer and content producer should travel. The input and support this blog is receiving from the Business community is truly a blessing and humbling at the same time. Especially considering I am not a professional writer.

So at the end of the day if you want to test an idea, a business strategy or an idea in your personal and professional life? I would recommend to try using the One Hundred Rule when deciding if something is worth pursuing or not. It gives you metrics, it gives you data and results to look on and ask yourself? This is interesting or it isn’t interesting. Should you put more time into this idea or shouldn’t you? Because realistically at the end of the day If you have followed this rule and pushed through the roadblocks and challenges. I feel your likely to agree you accomplished something amazing and surprised yourself. All because you took the time to use this fantastic little rule. Thank you for reading and thank you for your thoughts and comments below.

Do you agree using the One Hundred rule give you an advantage when most people in our society are likely to quit when they don’t see results after attempting a task or goal once or twice? Let me know.

Godspeed

JS

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