Business Exit Strategies Mergers & Acquisitions of Private
 

WHAT OUR CLIENTS ARE SAYING

 “ We have enjoyed a quite profitable and effective relationship with Mr Nielsen since early 2007 and have found him to be professional and supportive in assisting us with advice and management of the process of finding business partners for our organisation.

The support offered by Mr Nielsen in terms of effective marketing to and qualifying potential buyers has been outstanding” 

Scott Osbourne, CEO, Health First Medical Centres. 

It seems every growing business is destined to confront thr problem of raising capital at some stage of their development. It's part of the growing pains of entrepreneurship.

Until recently a lack of viable alternatives has limited enterprises to growing organically, that is, re-investing earnings back into the business year after year. But for most entrepreneurs, this is like a death of a hundred nails - slow and painful.

A more realistic option is the small-scale offering. In essence, you replicate what big business does to raise equity capital in return for a share of ownership. But unlike dealing with venture capitalists, it means you need never lose control of your business.

And it allows you to raise capital without issuing a costly and time-consuming registered prospectus that holds no guarantee that equity will be raised anyway.

A small-scale offer bridges the gap between entrepreneurs looking for growth capital and retail, professional and sophisticated investors who are considering equity investment in emerging enterprises.

Raising capital in Australia is governed by the fundraising provisions of the Corporations Act, 2001. The regulations are complex and convoluted and a minefield for the inexperienced. As well, penalties for non-compliance are severe.

A small-scale offer allows an entrepreneur to raise up to $2 million in a 12-month period from a maximum of 20 non-sophisticated investors (known as the 20/12 rule), unless they use a "business investment and matching service" where they can raise up to $5 million, without the need to issue a prospectus, as long as the rules are followed.

A non-sophisticated investor is known as a retail investor - your mum and dad types - and the law protects them from unscrupulous operators. You can only have 20 retail investors in the business in a 12-month period but any number of sophisticated, professional or overseas investors who are not caught within this limiting provision.

The key to a small-scale offer is the structure.

It needs to be set up so it is attractive to investors and should contain inbuilt incentives, given the early-stage nature and risk of the investment.

This is one of the keys to success. Make sure early investors benefit most by pricing the share issue attractively, provide them with an exit strategy and don't get greedy by only giving up a very small share in your business for their investment. Remember, without them, it's back to the nails.

Raising capital is always tough, particularly in the early stages of growth of an enterprise. It needs to be worked at and it needs time. Be prepared to pitch to investors and to answer their concerns.

In the end investors only put their hard-earned dollars on the table if they believe you can deliver on your promises.

It's a well-worn cliche but very true when it comes to raising equity. People buy people. They will ultimately invest in you, not your widget.

For a no obligation assessement of your Capital Raising needs, please call our office on 07 30109711 .