Managing Shareholder Value

Many companies are still not fully aware of the benefits of ensuring proper risk management. Recently there are many cases where shareholder value are seriously eroded because of a single person assuming too much power/authority.

Firstly, we really need to understand some of the following benefits managing Risk or Risk management:

• Once we have established a sound risk management culture into the organisation’s business framework, it promote productivity in the sense that senior management and line managers can focus more on their primary responsibilities instead of squandering resources on “fire-fighting” the challenges that may arise due to the lack of such practices,

• Its strengthen the business planning processes by allowing decision-makers to make contingency plans to avert possible “ mishaps” thereby producing more realizable opportunities for the organization on the whole and leading to increased shareholder value,

• It’s enhance shareholder value as it assist in reducing expenses as there are many direct and indirect cost of risk. (more…)

There is the increasing trend of listed companies going towards privatisation exercises.
Hence, it is important that we are aware of the reason for majority shareholders or founder shareholders of public listed companies to go private.

Listed below are some of the reasons :

• their company‘s share prices have been grossly under-valued by the public/share market;
• to avoid public scrutiny especially with the onerous corporate governance and disclosure requirements;
• the initial objective of listing no longer provide any tangible benefits;
• to avoid assets strippers/predators who seeks the opportunities in public listed companies where their share prices are below their net tangible assets (particularly in property development and stock broking businesses);
• high cost of maintaining those onerous corporate governance and disclosure requirements; (more…)

IPO/Listing is often the commonest key to unlock and maximised shareholder value.

Append below are some of the following obvious advantages of taking a private company into a public listed status:

• Enhances profile and standing of the company;
• Access to capital market;
• Flexibility in sourcing funds;
• Ability to get cheaper funding due to public listed status; (more…)

There are no right or wrong in pursuing inorganic growth vide M&A, as Managment/Board of those companies that are in the sunset industries are coerced by shareholder to look further.

Besides the above, the following are some of KEY REASONS for executing M&A:

1. Globalisation of business: Increased cross-border investments require companies in this region to remain competitive (e.g. minimise production cost and increase efficiency via maximising technology transfer). They may have to venture overseas to remain in business. Alternatively, companies may merge as a quicker way to grow bigger and stronger and to exploit synergies. (more…)

Very often, the Board of companies who have accumulated losses will issue right issues to its shareholders and start announcing/convincing them about the company’s future transformation they want to be

So let’s lookat at some of these strategies that can form the blueprint/excuses for transformation are:-

• immediate divestment of non-strategic businesses, (more…)

Earlier article there is the mention of hiving off as a mean to maximize/increase shareholder value. There is another corporate re-structuring/manuveure which is the opposite which is Hiving-down when a failed/restructured company want to create shareholder value.

So let’s look at what is Hiving-down?

It is the transfer of a business from an insolvent company owning it to a new subsidiary which is specially form for the purpose.

By doing so, there are advantages derived from it: (more…)

Besides inorganic growth vide Mergers & Acquisition,privatization,share-buyback and other strategies, one can also deploy a breakup strategy to enhance shareholder value. Incidentally, this break-up strategy is an attempt to make known to the market that your company’s worth is more than what has been assigned by the analyst. This is called “value transparency”.

The belief is that by valuing as a stand alone entity instead of as a “bundle” within a group of companies, the value should then become more obvious and might reflect a more favorable value.

Basically, breakup strategies can be in various forms as illustrated below: (more…)

One reverse way of looking at shareholder value is to see how companies failed in their business. Interestingly, those failed business relate to big entities which have many different businesses units and/ core businesses.

So why did these companies failed and what are the ways that shareholder value are eroded/destroyed.

Tabulated below perhaps are some major reasons for a business to under-perform or to fail:

To focus or to diversify has always been a debatable subject amongst Management. It has been noted that some public listed companies who are in the sun-set business or pressures from investors to generate more sterling results could have coerced managers to look at diversification.

Whether diversification is a right direction or not, Management needs to carefully review some critical questions before embarking on this strategy. (more…)

In a public listed company, as the equity are tradeable, shareholder value is very easily computed as number of equity times the current share price. Things like dividends augment shareholder value while issuing of shares (stock options) lower it. This Shareholder value added should be compared to average/required increase in value, aka cost of capital.

Compared to a Privately held company, the value of the firm after debt must be estimated using one of several valuation methods, s.a. discounted cash flow