Significant Chicago Bridge & Iron Company N.V. Shareholder, Cohen Capital Management, Calls for Immediate Change in Failed Senior Leadership | Business Wire
BROOKLYN, N.Y.–(BUSINESS WIRE)–Cohen Capital Management (“Cohen Capital”), one of the largest investors
of Chicago Bridge & Iron Company N.V. (NYSE: CBI) (“CBI” or “the
Company”) with an almost 1% stake in the Company, today issued a letter
to CBI Chairman of the Board, L. Richard Flury, calling out CBI’s dismal
financial performance, utter lack of go-forward strategy, and
management’s overall disregard for acting in the best interests of
shareholders. In the letter, Cohen Capital suggests implementing
immediate changes to management, including the termination of presiding
President and CEO Philip K. Asherman, to effect real change for
A copy of the letter follows:
August 24, 2016
Mr. L. Richard Flury
Chicago Bridge & Iron Company
One CB&I Plaza
2103 Research Forest Drive
Woodlands, TX 77380
I am the principal and managing director of Cohen Capital Management, a
New York family office with investments in both public and private
equity. We hold almost one percent of the common stock of Chicago Bridge
& Iron Company N.V. (“CBI” or the “Company”). As one of the Company’s
largest shareholders, I must express my deep concerns about the dismal
performance and misguided direction of the Company. On multiple
occasions, my office and I have reached out to senior leadership in an
effort to engage constructively about the present plight and future of
this potentially great company. It appears that the leadership is
dodging me to try to avoid answering very serious shareholder concerns.
I have over twenty years of investment experience with extensive
interests in, among other things, the oil and gas sector and real estate
sector. Cohen Capital pursues long-term investment opportunities in
durable value creation, generally with a 5-10 year investment horizon.
As the leader of the organization, I focus on investments in companies
run by honest, able, and shareholder-friendly management teams who can
create long-term, sustainable value for its owners.
In my career, CBI is the only company where the alarming failures of
management and the Board have compelled me to approach the Board in this
manner. However, the consistent, appalling and dramatic mismanagement of
CBI that has fumbled along destroying shareholder value and shrouding
what should be a strong business has forced me to make my concerns
Absolutely Unacceptable Shareholder Returns
In the past two years, the Company stock price has melted down from a
high of $89.22 reached on April 04, 2014, to $31.91, as of yesterday,
August 23, 2016. In a period of less than two years, the Company has
destroyed over $6 billion in shareholder value. Furthermore, CBI’s total
shareholder returns under a decade of leadership with its President and
Chief Executive Officer, Mr. Phillip K. Asherman, have been an abysmal
17% while the S&P 500 has returned over 116% during the period – a
staggering difference of over 99%.
Clearly Incapable Management
As shareholders know too well, the Company made a regrettable deal to
acquire Shaw Group in 2012 for a reported enterprise value of $2.0
billion and a staggering 7.0x transaction multiple to Shaw’s fiscal 2012
adjusted EBITDA. The Company publicized to shareholders and the market
that the acquisition would give it access to new revenue lines,
additional customers and a broader revenue base. Instead, the
acquisition has been a complete and utter disaster that continues to
cost shareholders to this day.
After the Company’s acquisition of Shaw Group, the Company worked on two
nuclear projects for over three years, without ever being paid for its
work. In addition, the Company continued to tell its shareholders that
eventually it would receive a payout for all the money owed in arrears.
Facing a resulting cash crunch, the Company was forced to raise billions
of dollars in fresh capital through the debt markets to fund its
operations resulting from the billions in losses sustained from the
nuclear projects. Subsequent to that, and the loss of many billions of
dollars in cash flow, the Company decided to sell its nuclear operations
to Westinghouse at another multi-billion dollar loss, with the provision
that it would eliminate all future liability from these operations for
However, the stunning mismanagement of this business continues to haunt
shareholders. Only recently did shareholders learn that Westinghouse is
challenging the premise of its deal with the Company and seeking an
additional two billion dollars. My efforts to understand this complex
and now clearly failed transaction with resulting litigation have been
consistently rebuffed. While I hope the Company can once and for all put
an end to this saga, I have no faith in management or its legal strategy
based on its consistent failed performance.
Appalling Lack of Accountability
Despite nearly a decade of squandering shareholder value on failed
transactions, a lack of strategy and blatant mismanagement there has
been no accountability at the highest levels of CBI.
The Company’s senior leadership has an obligation to take immediate
corrective action to remediate all of these significant issues plaguing
the Company. Indeed, since the Shaw Group acquisition and its ensuing
multi-billion dollar debacle, there has been not one senior leadership
change. It is clear that those fiduciaries charged with overseeing and
managing the Company have a tin ear to – or simply don’t care about –
the strongly held views of the shareholder base that accountability at
the senior management level is needed, and that a strategic vision and
accompanying concrete action plan for the future is needed.
For our Company to move forward on the right footing, we demand the
immediate termination of President and CEO Philip K. Asherman, under
whose leadership the wrong-headed acquisition and ensuing problems
occurred. He has lost the confidence of the core constituencies and,
frankly, has an abysmal track record that clearly justifies his removal.
As a result of Mr. Asherman’s abysmal leadership, CBI has underperformed
the market massively over the last 1, 5 and 10 years. During this time,
Mr. Asherman has sold millions in stock while the Company’s true owners,
the shareholders, have suffered. In the last week, he destroyed what
little credibility he had with shareholders by dumping his personal
stake while the stock traded near multi-year lows.
While markets rallied around the world, Mr. Asherman sold 468,600 of his
own shares last week between $32 and 34 per share. This is right near
CBI’s low share price of $31.30 for the year. After his latest sales, he
is now left with 328,050 shares according to a form 4 filed on August
18, 2016. Shareholders are left with no choice but to see he has no
confidence in the Company and that he believes the share price is headed
With a highly qualified, proven leader at the helm, we are confident
that CBI can turn the corner and deliver on its inherent potential to
create shareholder value. It is time for the Board to vigorously tackle
the job at hand; listen to the concerns of shareholders and make the
significant change so desperately needed.
As a shareholder of CBI, I reserve my right to pursue whatever actions
are necessary, including a potential proxy fight to replace board
members and force this change if the Board is unwilling to act for its
shareholders. I sincerely hope that this action will prove unnecessary
in the coming weeks if positive, concrete steps to change the management
and trajectory of the Company are implemented immediately.
About COHEN CAPITAL MANAGEMENT
Founded by Daniel Cohen in 1992, Cohen Capital Management, LLC provides
investment advisory services and invests capital on behalf of Cohen’s
family and a limited number of outside investors. The Company offers
investment advice, portfolio management, securities, and other financial
services. The firm manages money both in the United States and abroad
for private families and institutional investors. CCM employs a
research-intensive approach, based solely on rigorous corporate
fundamental analysis to determine undervalued companies and generate
above average returns for our clients over a five to ten year period.
PAREXEL International Enters Definitive Agreement to Be Acquired by Pamplona Capital Management for $88.10 Per Share in Cash | Business Wire
BOSTON & NEW YORK–(BUSINESS WIRE)–PAREXEL International Corporation (NASDAQ: PRXL), a leading global
biopharmaceutical services provider, and Pamplona Capital Management,
LLP (Pamplona) today announced that they have entered into a definitive
agreement under which Pamplona will acquire all of the outstanding
shares of PAREXEL for $88.10 per share in cash in a transaction valued
at approximately $5.0 billion, including PAREXEL’s net debt.
The purchase price represents a 27.9% premium to PAREXEL’s unaffected
closing stock price on May 5, 2017, the last trading day prior to
published market speculation regarding a potential transaction involving
the Company; a 38.5% premium to the unaffected 30-day volume weighted
average closing share price of PAREXEL’s common stock ended May 5, 2017;
and a 23.3% premium to the Company’s undisturbed 52-week high.
“Today’s announcement is the culmination of a comprehensive review of
the opportunities available to the Company, including interest solicited
and received from multiple parties with the assistance of independent
financial and legal advisors. Having considered these opportunities, the
PAREXEL Board of Directors unanimously determined that this all-cash
transaction and the significant, certain value it provides is in the
best interest of PAREXEL shareholders, as well as our company,” said
Josef von Rickenbach, Chairman and Chief Executive Officer of PAREXEL.
“PAREXEL benefits from a strong operating foundation with expertise and
resources to support our clients in their clinical trials around the
world. However, as our results over the past year show, the market for
biopharmaceutical services is evolving. We believe the more flexible
corporate structure afforded by this transaction will better position us
to advance PAREXEL’s strategy in light of these realities and to shape
the Company to best capitalize on our exciting market opportunities.”
Mr. von Rickenbach continued, “Pamplona has significant experience in
the pharmaceutical and healthcare industries, and we are pleased to have
their support as we work to realize the long-term opportunity for
PAREXEL. This transaction and the meaningful value it delivers for our
shareholders is a testament to the 19,600 employees who help our clients
advance the development and commercialization of new medical therapies
worldwide, and we will remain focused on providing our clients with the
service and support that have long set PAREXEL apart.”
Jeremy Gelber, M.D., Partner at Pamplona, said, “We have great respect
for the global leadership that Josef and the talented employees at
PAREXEL have built. We are excited to partner with a company and a team
that have a strong track record in helping to successfully navigate the
complexities innate to the biopharmaceutical industry and bring new
therapies to market.”
The transaction is not subject to a financing condition. Bank of America
Merrill Lynch and J.P. Morgan Chase Bank, N.A. have provided committed
financing for the transaction.
The transaction is expected to close early in the fourth quarter of
2017, subject to the approval of a majority of PAREXEL shareholders and
the satisfaction of other customary closing conditions.
PAREXEL expects to hold a Special Meeting of Shareholders to consider
and vote on the proposed agreement with Pamplona as soon as practicable
after the mailing of the proxy statement to shareholders.
The PAREXEL Board of Directors unanimously approved the transaction and
intends to recommend that all PAREXEL shareholders vote to approve the
agreement with Pamplona.
Upon the completion of the transaction, PAREXEL will become a privately
held company and shares of PAREXEL’s common stock will no longer be
listed on any public market.
Goldman Sachs & Co. LLC is acting as financial advisor to PAREXEL, and
Goodwin Procter LLP is serving as legal counsel.
Perella Weinberg Partners LP is acting as financial advisor to Pamplona,
and Kirkland & Ellis LLP is serving as legal counsel.
About PAREXEL International
PAREXEL International Corporation is a leading global biopharmaceutical
services company, providing a broad range of expertise-based clinical
research, consulting, medical communications, and technology solutions
and services to the worldwide pharmaceutical, biotechnology and medical
device industries. Committed to providing solutions that expedite
time-to-market and peak-market penetration, PAREXEL has developed
significant expertise across the development and commercialization
continuum, from drug development and regulatory consulting to clinical
pharmacology, clinical trials management, and reimbursement. PAREXEL
Informatics provides advanced technology solutions, including medical
imaging, to facilitate the integrated clinical development and
regulatory information management process. Headquartered near Boston,
Massachusetts, PAREXEL has offices in 86 locations in 51 countries
around the world, and has approximately 19,600 employees. For more
information about PAREXEL International visit www.PAREXEL.com.
PAREXEL and PAREXEL Informatics are trademarks or registered trademarks
of PAREXEL International Corporation or its affiliates. All other
trademarks are the property of their respective owners.
About Pamplona Capital Management
Pamplona Capital Management is a London, New York, and Boston-based
specialist investment manager established in 2005 that provides an
alternative investment platform across private equity, fund of hedge
funds, and single-manager hedge fund investments. Pamplona manages over
$10 billion in assets across a number of funds for a variety of clients
including public pension funds, international wealth managers,
multinational corporations, family offices, and funds of hedge funds.
Pamplona invests long-term capital across the capital structure of its
portfolio companies in both public and private market situations and has
been one of the most active private equity investors in healthcare in
recent years. Notable recent Pamplona healthcare investments include
nThrive, Formativ Health, Brighton Health Group, Alvogen, Spreemo,
PatientCo and Intralign. Please see www.pamplonafunds.com
for further information.
Additional Information about the Proposed Transaction and Where to
PAREXEL plans to file with the U.S. Securities and Exchange Commission
(“SEC”) and furnish its shareholders with a proxy statement in
connection with the proposed transaction with Pamplona and security
holders of PAREXEL are urged to read the proxy statement and the other
relevant materials when they become available because such materials
will contain important information about PAREXEL, Pamplona and their
respective affiliates and the proposed transaction. The proxy statement
and other relevant materials (when they become available), and any and
all other documents filed by PAREXEL with the SEC, may be obtained free
of charge at the SEC’s website at www.sec.gov.
In addition, investors may obtain a free copy of PAREXEL’s filings from
PAREXEL’s website at www.PAREXEL.com
or by directing a request to: PAREXEL International Corporation, 195
West Street, Waltham, Massachusetts 02451, Attn: Ron Aldridge, Senior
Director of Investor Relations.
INVESTORS AND SECURITY HOLDERS ARE URGED TO READ THE PROXY STATEMENT AND
THE OTHER RELEVANT MATERIALS WHEN THEY BECOME AVAILABLE BEFORE MAKING
ANY VOTING OR INVESTMENT DECISION WITH RESPECT TO THE PROPOSED
Participants in the Solicitation
PAREXEL and its directors and executive officers may be deemed to be
participants in the solicitation of proxies from the security holders of
PAREXEL in connection with the proposed transaction. Information about
those directors and executive officers of PAREXEL, including their
ownership of PAREXEL securities, is set forth in the proxy statement for
PAREXEL’s 2016 Annual Meeting of Stockholders, which was filed with the
SEC on October 26, 2016, as amended and supplemented by other PAREXEL
filings with the SEC. Investors and security holders may obtain
additional information regarding the direct and indirect interests of
PAREXEL and its directors and executive officers in the proposed
transaction by reading the proxy statement and other public filings
referred to above.
This press release includes forward-looking statements within the
meaning of the Private Securities Litigation Reform Act of 1995. These
forward-looking statements include, but are not limited to, potential
opportunities to accelerate PAREXEL’s growth and enhance its delivery of
world-class solutions to its customers; PAREXEL’s position to capitalize
on an increased trend for outsourcing of pharmaceutical products and
services; the expected impact of this transaction on PAREXEL’s financial
and operating results and business, the operation and management of
PAREXEL after the acquisition, the anticipated funding for the
transaction, and the timing of the closing of the acquisition. The words
“anticipates”, “believes”, “expects”, “may”, “plans”, “predicts”,
“will”, “potential”, “goal” and similar expressions are intended to
identify forward-looking statements, although not all forward-looking
statements contain these identifying words. Readers should not place
undue reliance on these forward-looking statements. PAREXEL’s actual
results may differ materially from such forward-looking statements as a
result of numerous factors, some of which PAREXEL may not be able to
predict and may not be within PAREXEL’s control. Factors that could
cause such differences include, but are not limited to, (i) the risk
that the proposed merger may not be completed in a timely manner, or at
all, which may adversely affect PAREXEL’s business and the price of its
common stock, (ii) the failure to satisfy all of the closing conditions
of the proposed merger, including the adoption of the Merger Agreement
by PAREXEL’s stockholders and the receipt of certain governmental and
regulatory approvals in the U.S. and in foreign jurisdictions, (iii) the
occurrence of any event, change or other circumstance that could give
rise to the termination of the Merger Agreement, (iv) the effect of the
announcement or pendency of the proposed merger on PAREXEL’s business,
operating results, and relationships with customers, suppliers,
competitors and others, (v) risks that the proposed merger may disrupt
PAREXEL’s current plans and business operations, (vi) potential
difficulties retaining employees as a result of the proposed merger,
(vii) risks related to the diverting of management’s attention from
PAREXEL’s ongoing business operations, and (viii) the outcome of any
legal proceedings that may be instituted against PAREXEL related to the
Merger Agreement or the proposed merger. In addition, PAREXEL’s actual
performance and results may differ materially from those currently
anticipated due to a number of risks including, without limitation:
changes in customers’ spending and demand and the trends in
pharmaceutical companies’ outsourcing of research and development;
PAREXEL’s ability to provide quality and timely services and to compete
with other companies providing similar services; PAREXEL’s ability to
comply with strict government regulations of the drug, medical device
and biotechnology industry; PAREXEL’s ability to successfully integrate
past and future acquisitions, including the acquisitions of Health
Advances, LLC, ExecuPharm, Inc., and The Medical Affairs Company, LLC,
and to realize the expected benefits of each; a change in PAREXEL’s
relationships with its largest customers; PAREXEL’s ability to service
its indebtedness; PAREXEL’s ability to protect its technology and
proprietary information and the confidential information of its
customers; the loss, modification, or delay of contracts which would,
among other things, adversely impact the Company’s recognition of
revenue included in backlog; the Company’s dependence on certain
industries and clients; the risk of patent infringement and other
litigation; as well as those risks discussed in PAREXEL’s Annual Report
on Form 10-K for the year ended June 30, 2016 as filed with the
Securities and Exchange Commission (SEC) on September 9, 2016,
subsequent Quarterly Reports filed with the SEC and PAREXEL’s other SEC
filings. Numerous factors, including those noted above, may cause actual
results to differ materially from current expectations. PAREXEL
expressly disclaims any current intention or obligation to update any
forward-looking statement in this press release to reflect future events
or changes in facts affecting the forward-looking statements contained
in this press release.
Categories: Uncategorized Tags: capital management, executive officers, international corporation, pamplona capital, parexel international, parexel shareholders, press release, proposed merger, proxy statement, relevant materials, security holders
Forex International Trading Corp. Signs Joint Venture Agreement with Heffernan Capital Ltd. | Business Wire
NEW YORK–(BUSINESS WIRE)–Forex International Trading Corp. (the “Company”) (OTCBB:FXIT), today
announced a joint venture with Heffernan Capital Ltd. The purpose of the
joint venture is to promote the www.4xint.com
site throughout Asia.
This Joint Venture is being tested for six months to determine the
market opportunity in the Asia market. While Singapore has represented a
strong market for the Triple 8 platforms, the Company has not focused
its marketing efforts in other countries in the region.
Forex International Trading has chosen Heffernan Capital Ltd. to partner
with to market in this region because of their strong reputation and web
presence in this region. In fact, one of Heffernan Capital’s websites www.livetradingnews.com
ranks 515 in South Korea on www.alexa.com
which places it higher than www.fidelity.com,
Forex International Trading CEO Darren Dunckel commented “I am excited
to partner with such well respected names in the financial services
industry.” Issaree Suwunnavid CEO of Heffernan Capital said, “Foreign
Exchange, Gold and Commodity Trading are extremely popular in Asia and
we will be building out multilingual services to capture that market.
The reach that the new web platforms provide should provide us with
exposure that will help us to execute our business plan in the Asian
The site www.4xint.com
will continue to block traffic from the United States while the Company
continues to develop its strategy for the United States.
About Heffernan Capital Management
Heffernan Capital Management aims to become one of the world’s leading
asset management enterprises. It specializes in global investment
management, risk management and advisory services to institutional,
intermediary and individual investors around the world. Heffernan
Capital Management offers a range of solutions, from proprietary active
management approaches aimed at delivering true outperformance to
algorithmic indexing strategies designed to manage broad exposure to the
world’s capital markets. Heffernan Capital Management brings investment
solutions through a wide variety of product structures, including
individual and institutional separate accounts, mutual funds and other
pooled investment vehicles, and the industry-leading trading platform
Heffernan Capital Management Direct. The foundation of our business is
to deliver the best for our clients, every time.
Heffernan Capital Management combines specific market insights, global
reach and scale, proprietary technology, strong local knowledge and
ability to deliver performance in all market environments. Its goal is
always striving to achieve the best balance between risk and
opportunity. It is a global firm with our roots in the Emerging Markets
of Asia; that combines the benefits of worldwide reach with local
service and relationships.
About Forex International Trading Corp.
Headquartered in New York, NY, Forex International Trading Corp.
operates an offshore advanced online trading platform for Forex markets
to non U.S. residents. The Company focuses on providing individual and
institutional investors with a platform for buying and selling
currencies, precious metals and commodity futures. The company’s
platforms allow self-directed, broker-assisted, and managed accounts.
Through the platforms, customers have access to over 20 currencies and
bullion deliveries. The Foreign Currency Market (“Forex” or “FX”) is
created by the global exchange of currencies. According to the Bank for
International Settlements, the average daily turnover, or, volume in the
Global FX market in April 2010 was $4 Trillion compared to only $1.2
Trillion in 2001 (Wall Street Journal, Sept. 1, 2010). Historically,
access to the FX market was only available to governments, commercial
banks, corporations, and other large financial institutions. The Company
is now capitalizing on the growth of online currency trading through its
state of the art web-based trading platforms.
For more information, please visit: http://www.forex-international-trading.com.
Forward-Looking Statements: This press release contains
forward-looking statements, including expected industry patterns and
other financial and business results that involve known and unknown
risks, uncertainties and other factors that may cause our actual
results, levels of activity, performance or achievements to differ
materially from results expressed or implied by this press release. Such
risk factors include, among others, whether Forex International Trading
Corp. can successfully execute its operating plan; its ability to
integrate acquired companies and technology; its ability to retain key
employees; its ability to successfully combine product offerings and
customer acceptance of combined products; general market conditions; and
whether Forex International Trading Corp. can successfully develop new
products and the degree to which these gain market acceptance. Actual
results may differ materially from those contained in the
forward-looking statements in this press release. Forex International
Trading Corp. does not undertake any obligation to update or revise
forward-looking statements to reflect changed assumptions, the
occurrence of unanticipated events or changes to future operating
OKLAHOMA CITY–(BUSINESS WIRE)–Paycom Software, Inc. (NYSE:PAYC), a leading provider of comprehensive,
cloud-based human capital management software delivered as
Software-as-a-Service, today announced that the company will participate
in the following investor event:
Stifel Technology, Internet & Media Conference
Date: June 5,
Time: 8 a.m. Pacific time
Location: The Fairmont Hotel
in San Francisco, Calif.
A live webcast of the presentation will be available at
investors.paycom.com under the “Events” tab. Presentations may include
forward-looking information. Webcast replays will be available for 90
days following the event.
As a leader in payroll and HR technology, Oklahoma City-based Paycom
redefines the human capital management industry by allowing companies to
effectively navigate a rapidly changing business environment. Its
cloud-based software is based on a core system of record maintained in a
single database for all human capital management functions, providing
the functionality that businesses need to manage the complete employment
lifecycle, from recruitment to retirement. Paycom has the ability to
serve businesses of all sizes and in every industry. As one of the
leading human capital management providers, Paycom serves clients in all
50 states from offices across the country.
Categories: Uncategorized Tags: business wire, capital management, cloud based, conferencedate june, fairmont hotel, human capital, internet media, investor event, stifel technology, technology internet
There are four main financial requirements of a business, namely, working capital, fixed assets, marketing costs, and a contingency fund. The financial management for a business involves managing all these in an efficient manner. Working capital is the amount of money that a company has to carry on with its daily operations. To determine working capital requirement, let’s first learn how to calculate working capital.
Working Capital Calculation
A company has two kinds of assets namely fixed assets, such as property and machinery, and current assets. The current assets of a company are those which will be used up within a single fiscal year. They include cash in hand, cash at bank, accounts receivable, pre-paid expenses, inventory, and short term investments. Current liabilities are those which have to be settled in cash within the current fiscal year. They include all the accounts payable pertaining to goods and services, including short term loans payable within one year. Working capital is the difference between the current assets and the current liability. The mathematical formula for this is:
Working Capital = Current Assets – Current Liabilities
Working Capital Requirement
The net working capital requirement varies from company to company. And within the company itself, it may vary from month to month. It depends on two factors, namely, how much earnings a company has and what is the frequency of receiving those earnings. Secondly, what are the expenses that a company has and how frequently these payments have to be settled.
For determining how to calculate working capital requirement for a new investment, the business managers have to make forecasts of the earnings i.e. accounts receivable, inventory, as well as the expenses i.e., accounts payable. After the projections have been made, you have to compare the actual earning and expenses with the projections. Next, add the increase in accounts receivable and the increase in inventory, and subtract the accounts payable from this amount. The figure you then get will reflect the probable change in working capital, which can be used for the new investment. This change is also determined through the inflow and outflow of funds. So these two things should also be taken into consideration while calculating the working capital requirement. The mathematical formula for this is:
Working Capital Required = (Increase in accounts receivable + Increase in inventory + Cash inflows i.e., cash in bank, bank loan, other current assets) – (Increase in accounts payable + Cash outflows i.e., prepaid expenses, payment to suppliers, other current liabilities)
Working Capital Management
Working capital management is very important to ensure that the company has enough funds to carry on with its day-to-day operations, smoothly. A business should not have a very long cash conversion cycle. A cash conversion cycle measures the time period for which a firm will be deprived of funds, if it increases its investments as a part of its business growth strategies. For this, the company has to take certain measures such as reduce the credit period of the customers, negotiate with the suppliers, and increase its own credit period with them, maintaining the right level of inventory, which reduces the raw material costs and proper cash management which ensues that cash holding costs are reduced. If these measures are followed, the requirement automatically comes down.
There are a few other things to consider. If the current liabilities of a company are more than the current assets, it represents a working capital deficiency, and may sometimes lead to business debt. A deficit working capital has a negative impact on the company’s image, as it depicts that the company is facing problems in liquidity, and is not able to pay for its short-term costs. In such a scenario, the investors may back out on making any kind of investments in the company. Thus, financial planning, including working capital planning, is very essential to run a business efficiently.
Categories: Uncategorized Tags: accounts payable, accounts receivable, capital management, capital requirement, cash conversion, current assets, current liabilities, fiscal year, liabilities working, mathematical formula, short term, working capital
From the perspective of the chief financial officer, the concept of working capital management is relatively straightforward: to ensure that the organization is able to fund the difference between short-term assets and short-term liabilities. In practice, though, working capital management has become the Achilles’ heel of scores of finance organizations, with many CFOs struggling to identify core working capital drivers and the appropriate level of working capital.
As a result, companies can be limited in their ability to weather unforeseen or adverse events and ensure that cash is readily available where it is needed, regardless of the circumstances. By understanding the role and drivers of working capital management and taking steps to reach the “right” levels of working capital, companies can minimize risk, effectively prepare for uncertainty and improve overall performance.
Theory vs. Practice
For most CFOs, the greatest challenge with respect to working capital management is the need to understand and influence factors that are out of their direct control, in order to obtain a complete picture of the company’s needs. The CFO’s span of control can be limited in terms of functional silos, though corporate finance may well have some powers of influence over operating units.
While organizations generally concentrate on the right processes, such as cash, payables and their supply chain, they are less likely to take into account various internal and external constraints that can dictate how effectively those processes are executed. For example, the legal and business environments can have a significant impact on performance. Similarly, internal considerations–such as organizational structure, shared systems, autonomous business units, multinational operations and even information technology–can impact working capital, creating barriers that can hinder a CFO’s ability to truly understand, and therefore manage, the company’s needs.
The human factor is another important consideration. If management is focused purely on top-line growth, insufficient attention may be applied to cash flow management and forecasting. A hard-line focus on year-end or quarter-end results can produce a flattering, but inaccurate, picture of working capital performance and lead to counter-productive behavior.
Consider the impact on working capital of a year-end sales push where production has been building up inventory (which may not be the appropriate inventory) to meet this artificial demand, and the quality of receivables deteriorates during the early part of the following year.
While there is no magical solution for effecting robust working capital management, there are a number of prerequisites for gaining control of the complex process.
Proper cash flow forecasting is essential to successful working capital management. To do this effectively, organizations must take into account internal and external working capital drivers and consider the sensitivity of those drivers to changes in the business or market.
Various questions need to be asked: How will unforeseen events impact working capital requirements? What if a sudden market downturn or upturn occurs? What if the company loses a major customer? What happens if a major competitor takes a significant action to improve its market position? Since each of these could have a sizable impact on the business, organizations must assume that the only certainty will be uncertainty, and prepare accordingly.
In addition to assessing the cash flow impact of potential events, companies should consider the possibility of having to make additional working capital investments. That’s because events could affect non-operational cash requirements such as investments, credit ratings and the ability to service debt, as well as inventory, payables and receivables.
Companies must implement contingency plans that take a holistic view of the organization in the context of a variety of different challenging situations. This will help minimize the adverse effects of unforeseen events and provide financial flexibility in uncertain times by having working capital as a ready source of cash.
How can you manage uncertainty? The three fundamental approaches are: control it, predict it, react to it. The most successful approaches are based around one approach, but contain elements of all three. Market-leading companies, perhaps not surprisingly, are in the best position to manage uncertainty, often enjoying the ability to control supply, minimize inventory and apply payment pressure on customers.
Companies with less influence, however, must rely more heavily on a strategy of prediction. To properly prepare for events and improve or maintain performance during times of uncertainty, organizations must develop an objective, business-driven view of the role of working capital. Without real insight into true working capital drivers, a company may be able to produce a reasonably good consolidated forecast, but find that accuracy drops considerably when it comes to producing divisional, operating unit or even a product-line forecast.
The most effective programs for both improving working capital performance and forecasting are those that look beyond the local organization and consider the broader corporate environment. Corporate investment and financing arrangements, for example, may provide for cash to be delivered by one location, but utilized at others. Restrictions on the repatriation of cash, internal inefficiencies in moving cash, delays driven by banks and sometimes-inadequate access to information can make the process problematic.
Cash generated in one country, for example, many not have the same value to the organization as cash generated in another. As a result, companies must plan global working capital improvement initiatives in the context of the ultimate use for the cash, rather than simply managing local balance sheets.
Setting the Stage
Successfully improving working capital management requires a multipronged approach. Companies must seek granular detail to identify the underlying drivers of working capital. This requires separating perception from reality and pinpointing impediments to efficient cash flow, such as poor links between production and billing or clumsy treasury operations.
Companies must also adopt an entrepreneurial mindset. They must act quickly to drive change by combining operational and financial skills, and expand their thinking beyond the finance organization to gain a more complete view of overall operations. Rather than wait for the perfect solution, they must identify and implement strategies that result in quick wins, generating short-term cash to fund longer-term projects.
Having the right people in place can also make or break the effort. Companies need to identify individuals who can be responsible for setting targets and performance levels and be held accountable for delivering. These professionals should be encouraged to challenge the status quo and drive change, using cross-functional teams.
Finally–and this is where many projects fail–companies must remove emotion from the analysis process. All initiatives must be business-case driven, and projects without measurable results or those not contributing to overall goals should be abandoned. Companies must agree on success criteria, prioritize based on contributions to these criteria and continuously measure performance.
While working capital forecasting is critical to a company’s ability to make informed strategic business decisions, many CFOs struggle with the process because of a lack of control and real insight into the underlying drivers of their working capital needs. By empowering the entire organizations to understand the company’s true working capital needs, companies can successfully reduce their financial risk, prepare for uncertainty and create a ready cash reserve that will provide flexibility and security during difficult times.
Andrew Harris (firstname.lastname@example.org) is a United Kingdom-based Senior Director with Alvarez & Marsal, a global professional services firm. He specializes in performance improvement and working capital initiatives at companies throughout Europe and the U.S.
Bridgeway Capital Management Names Devin Benton as Director, Institutional Sales and Client Relations | Business Wire
HOUSTON–(BUSINESS WIRE)–Bridgeway Capital Management (Bridgeway), an independent, statistically
driven investment manager, announced today that Devin Benton has joined
the firm as Director, Institutional Sales and Client Relations.
In this new position for Bridgeway, Benton will develop relationships
with institutional clients such as public plans, foundations and
endowments, as well as the consultants who serve them. Bridgeway’s
recent success with institutional clients has come from a shared goal of
providing better outcomes for investors. Benton will help strengthen
these relationships by listening to the needs of institutional clients
and matching them with the discipline and expertise that Bridgeway
“We have seen how our investment philosophy resonates with the
institutional market, and we needed a special kind of person to help us
bring it to a wider set of investors,” says Tammira Philippe, President
of Bridgeway Capital Management. “We are delighted we found someone of
Devin’s caliber who believes in our evidence-based investment process,
shares our commitment to putting investors first, and also wants to make
a difference in the world.”
Benton comes to Bridgeway with more than 15 years’ experience in the
investment industry, with a strong focus on serving public and corporate
plan sponsors, foundations and endowments, and investment consultants.
Prior to entering financial services, Benton served as an officer in the
U.S. Army, achieving the rank of Captain. Leading teams comprised of
individuals from a wide range of cultures and backgrounds demonstrated
the value of diverse perspectives in building teams, working toward
common goals and achieving shared success. He believes those skills are
critical to successful outreach to a range of potential clients, from
the largest institutional investors to small municipal plans and family
Bridgeway’s unique corporate culture, which includes a pledge to donate
50% of profits to charitable organizations, also offered Benton a chance
to better align his private-sector career with his personal commitment
to serving others.
“I have yet to see another firm in the industry that offers Bridgeway’s
combination of world-class investment strategies and record of
delivering exceptional results, along with the values and principles
that our firm lives by every day,” says Benton. “I’m excited to be
working at a place that is committed to doing everything it can for
clients, while also serving our communities in incredibly impactful
Benton will report to Dick Graf, the head of Bridgeway’s Marketing and
Client Service team. He plans to spend much of his time on the road,
meeting with institutional investors and consultants to show how
Bridgeway’s expertise can help them meet their own fiduciary
About Bridgeway Capital Management
Bridgeway Capital Management, Inc., offers expertly designed investment
strategies, mutual funds and sub-advisory services to select
institutions and advisors. Bridgeway believes that a disciplined,
statistical process – grounded in academic theory and fundamental data –
drives success in long-term investing. Putting investors’ interests
first is a hallmark of the firm’s unique culture and core business
values of integrity, performance, efficiency and service. Committed to
community impact, Bridgeway donates 50% of its profits to non-profit and
charitable organizations. More information on Bridgeway is available at www.bridgeway.com.