Wednesday, June 15th, 2011 - Value Creation - Alternative
Value Creation – Alternative LTD (VC-A) helps companies develop their business and raise funding on their behalf from Alternative Capital Markets.

There is a clear definition for “Capital Market”: “Capital Market” is any market for debt or equity securities, where companies raise long term funds.

But what are “Alternative Capital Markets”?

At VC-A, we define “Alternative Capital Markets” as sources of funding that may still be available when the most “common” approaches to fundraising have failed. In other words, when your lifetime Banker has rejected your request for a loan and the Market displays no appetite to subscribe to your next share issuance programme, then you need to look into the “Alternative Markets”.

Alternative Fund Providers will typically be willing to take on more risk than traditional Investors because they have developed a specific expertise on their “niche” that gives them a competitive advantage over generalists. The down side from the Fundraisers’ perspective is that out of a myriad of potential Investors, they need to identify the one(s) whose Investment criteria match exactly their risk profile.

The first step to approaching Alternative Capital Markets is to define the financial instruments mix that is more likely to meet Investors requirements based on the idiosyncrasy of the Company and the Project. The following framework may help understand the different drivers of interest:

http://s3.amazonaws.com/ng.digitalmonkey.com.au/release_files/9341/ValueChain.png

Once the financial instrument mix is defined, Fundraisers need to identify the right Investor(s) for each instrument. At VC-A, we have pre-established relationships with a portfolio of Alternative Investors to cover most of the demand spectrum and hit the ground running.

Finally comes the tricky part of the process. It is indeed highly unlikely that a standard business plan and business case would fit any given Alternative Investor’s criteria. Documents need to be customised for each Investor otherwise they will miss the target. What is more, the business case will need to be rewritten and aligned to the financial instrument mix defined at the beginning of the process. For example, if the company is at pre-IPO stage, it may need first to raise a mezzanine debt to launch an IR campaign combined with an Equity Line of Credit to attract global investors post-IPO.

Funding projects or companies through Alternative Capital Markets is like putting together a jig-jaw of different Players that taken individually would not consider the opportunity. Our understanding of the Players’ map is as follow:

http://s3.amazonaws.com/ng.digitalmonkey.com.au/release_files/9344/PlayersLandscape.png

Case study: Funding of a renewable project in an Emerging country.

Sources of funding to be considered:

Public: World Bank, ECB, local subsidies…
Private: Public-Private Partnership? Asset-Backed Loan, Equity Backed Loan, Monetization of SBLC/BG, Specialised Hedge Funds, Private Placement Programmes…
Listed: Pass-through from Equity Line of Credit.

As a consequence, the transaction cost of funding an initiative through Alternative Capital Market is more expensive than through common sources of funding. It would be foolish and ridiculous to believe that there are Investors out there with bags full of money willing to give it away to entrepreneurs or developers with neither guarantees nor commitments.

It would also be foolish and ridiculous to believe that serious Corporate Advisors will open their books and put in jeopardy the relationship with their Investors at success only without first securing a strong commitment from their Client.

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Value Creation - Alternative


Value Creation – Alternative is a Strategy and Investment Advisory firm. We help companies to develop their business through acquisition and organic grow. We accompany our clients throughout the entire life cycle of their corporate development programme: strategy definition, target search, due-diligence, negotiation, transformation map and change management.

We are a worldwide network of seasoned professionals and have collectively advised M&A projects worth nearly US$100B.

We support complex strategic and operational business decisions with deep analysis and robust processes. Our methodology is a combination of desk research, interviews and application of our internal know how.

Christophe Schwoertzig
P: +34 677581335
W: www.vc-alternative.com/eng/home.htm

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Alternative Capital Market Fundraising Value Creation Funding Funds Money Banks Loan Equity Advisory Consulting

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