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Financial Literacy

Common Ways Of Defending A Takeover Of Your Company

I imagine as a small business you probably haven’t faced a hostile take over of your company by a rival or an interested group of investors

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Common Ways Of Defending A Takeover Of Your Company

 

Ok, I imagine as a small business you probably haven’t faced a hostile take over of your company by a rival or an interested group of investors or even by your fellow shareholders. Yes, your shareholders can mount of take over of your shares and do it successfully. This can be a very painful experience particularly if it is a company you founded and nurtured as a startup.

In corporate finance, there certain techniques which accountants use to mount to defence in the event of a take over. Some of them have funny terms but have been used successfully in the past.

Poison Pill

A poison bill is a tool used by directors of a company who do not support a takeover bid. The tactic is to offer shareholders who are not involved in the take over incentives to buy shares at a cheap price after a takeover bid has been completed. The effect being that the shareholder who takes over will see his ownership diluted in due time. For example, your company suddenly gets targeted by an investor who has convinced some shareholders to sell their shares to him giving him a 40% ownership of the company.

If however, in the past there exist a shareholder agreement that gives existing shareholders (prior to the new investor joining the company ) a discount on future sale of shares in the company. The effect of this is that this may dilute the 40% owned by the investor and will now need to spend more to get back to 40%. A proposition that most hate to face.

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[Read Also: GTBank in acquisition talks]

Shark Repellant

This involves altering the Memorandum and Articles of An Association (MEMAT) in such a way as to make takeovers very difficult to achieve. For example, you can enshrine in your MEMAT that before a takeover of a company can be achieved the shares being sold by the willing sellers must be up to 80% of the outstanding shares of the company. So, if you own 30% of a company you started and your partners suddenly want to sell their shares to an investor you do not like, this method simply stops them from achieving that. But remember, this only works if you are able to show that this is enshrined in the MEMAT of the company.

Golden Parachutes

Whilst not totally beneficial to the shareholders Golden Parachutes are a set of clauses that warrants that any take over bid that involves loss of jobs will force the buyers to pay a severance to the employees of the organisation who may have lost their jobs due to the takeover. This is particularly useful to companies with employees who are pioneer staffs. A golden parachute ensures that they are well protected in the event of a takeover which quite naturally triggers a change of management and key personnel.

White Knight

As the name suggest, a White Knight is a friendlier acquirer who a target company may approach to fend off a hostile acquirer. For example, your company may be failing to deliver on its promises for improved returns necessitating in your partners asking that the company be sold. They now put forward a buyer that you loath for whatever reason. Being a founder, you are against the deal and to therefore show you have a better offer, you look for companies you prefer in the hope that they offer a better price.

Greenmail

A Greenmail is an antitakeover  tactic used to block the purchase of your company from a hostile acquirer. For example, an investor has gone behind your back acquiring shares from your partners, say for N2 per share. Having discovered and with little or no option you decide to approach the hostile acquirer asking that you buy back those shares at a premium. This is what is called a Greenmail. For this tactic to work you must be ready to play ball. Besides Greenmail can be dangerous too because it might lead to other people attacking you making you vulnerable to keep playing defence.

[Read Also: Would you stake your money on Roads Nigeria Plc?]

Pacman Defence

As the name suggest it is a counter attacking tactics that involves a target company buying back the shares of its hostile acquirer. For example, an investor or a rival is gradually buying up your shares so as to mount a bid for the takeover of your company. Upon noticing, you decide to attack the acquirer by buying shares in his company as well. That way every attempt he is making on your company is neutralised by the attempts you are making on him too.

Lockup Defence

Assuming that you have patent to a program that you customers love to use. You have made so much money from it now you partners think its time to move on and decide to sell their shares to some new investor at a premium. To dissuade them, all you need to do is sell the Program  since it is the reason why your company is a target. Your shareholders may not like it but if that is the only option you have then thats it. You must also be sure that you can repurchase that program or have what it takes to build another another cash generating program.

Sandbag

Sandbag is a system whereby the management of a company purposely delays the process of selling the company in the hope that they will find a better offer. This off course works when you as the major stake holder is willing to stake out for a better buyer.

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People Pill

People Pill is basically a threat by management that they will jointly resign  should the company shareholders agree a takeover. This will work for you if your partners have no technical input in your company and simply rely on you to drive earnings. The risk for them is that you are the main asset and as such once you resign the company will go bust.

[Read Also: Investors in Budweiser’s International Breweries wail as N163 billion is wiped out of market value.]

 

Nairametrics is Nigeria's top business news and financial analysis website. We focus on providing resources that help small businesses and retail investors make better investing decisions. Nairametrics is updated daily by a team of professionals. Post updated as "Nairametrics" are published by our Editorial Board.

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Personal Finance

Personal Finance Culture: The 4 Cs of Financial Success 

To achieve financial success, the 4Cs will be of great help.

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Borrowing money, Personal Finance Culture: The 4 C’s of Financial Success 

Many Nigerians who had a pseudo-confidence in their financial stability, were rocked by the storms of the economic hardship that followed the COVID-19 pandemicSome did not survive it, while those who did, now seek ways to be better financially equipped for future eventualities. 

It’s six (6) months since the COVID-19 outbreak was officially declared a global pandemic by the World Health  Organization (WHO) on March 11th, 2020With the full enormity of the pandemic in mind, we cannot come out of this without noting its attendant life lessons. Interestingly, some of those lessons correlate with principles that can enhance your personal financeon your journey to financial freedom.  

READ: Emirates Airlines banned from operating in Nigeria

Financial freedom does not happen overnight, as it results from self-discipline and good money habits practised consistently over time. 

To help you on your journey, I have come up with the 4Cs. To achieve financial success, you must be; 

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  1. Creative – Find creative ways to earn more money. Having more than one source of income is a good way to increase your financial security. I’m sure the people who lost their jobs or took a pay cut during the pandemic will agree with me.
  2. Conservative – Be conservative with your expenses, and make sure to spend less than you earn. You can actually save more if you stick to a budget. It is okay to occasionally reward yourselfand enjoy the finer things of life. But that should also be on budget. 
  3. Consistent – Form the habit of saving and investing part of your income. As far as savings go, you need to have at least 3 months’ worth of living expenses, stashed away in liquid assets – Emergency funding, to cushion the impact of job loss, unplanned medical expenses, and other emergencies. It also applies to small businesses – many SMEs without any financial buffer felt the impact of the lockdown from Day 1. Investing, on the other hand, is the only way you can grow your money. You should take it seriously; develop the right mindset, become financially intelligent, and seek expert advice before taking a step. 
  4. Careful – Be careful who you listen to. Not every investment advice is good for you, and you should do your due diligence before releasing your money. 

READ: Effective financial planning after taking a pay cut in Nigeria

So, will you be making any changes to your money management style? What did you wish you learnt about money pre-COVID-19? 

Importantly, we are not out of the woods yet. The virus is still out there, and you should stay safe, as Health is Wealth. 


 

 Temitope Busari, CFA 

Temitope is an Investment Professional, with over 11 years of cognate experience spanning regional financial markets across Sub-Saharan Africa. Her technical skills cut across Treasury, Risk management, Fintech solutions, and Strategy. With a passion for positive social impact, she leverages multiple media platforms to advance financial literacy efforts, helping individuals and small businesses make better money decisions. 

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Personal Finance

Budgeting apps that help you manage your personal finance

In today’s world, these apps make it easy to effortlessly manage your finances.

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Money apps for professionals

In our fast-paced lives and rapidly evolving world, technology makes it possible to get things done in a more convenient manner, saving time, energy, and other resources. Personal budgeting should be a daily routine and somewhat a habit in our lives, unfortunately, not many people pay attention to this.

The tech world has taken notice and provided us with ways to manage our finances with convenience and ease through mobile apps development.

Life is good when you are on top of your money and ahead of your expenses; these apps make it easy to effortlessly manage your finances.

READ: How hackers break into your WhatsApp account, and how to avoid them

1. GoodBudget: This budgeting app uses the shared envelope-budgeting principle. With its virtual tracking program, it makes it possible to not only, keep up with friends and family by syncing shares and budget, but also lets you save for big expenses and pay off debt. With a friendly user interface, the app makes it easy to categorically differentiate your regular monthly expenses from annual savings goals and irregular expenses. It is important to note that this particular app doesn’t sync transactions with your financial institutions, so for every amount that comes in or goes out, you’d have to manually enter the transactions. Another incentive this app offers is that it provides customisable reports for you to keep track of budget trends, offers helpful tips on how to create a budget and get ahead of your expenses. Works on android and iOS devices.

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2. Piggyvest uses the traditional, simple saving idea of a piggybank, also locally known as ‘kolo ’. It presents you with the opportunity to use the ‘piggybank’ feature to reach personal savings goals more quickly. There are several other features for various purposes such as ‘Target Savings’ which helps you save for multiple goals like holidays, fees, and special events, ‘SafeLock’ which secures your funds by locking it until your pre-selected, this helps avoid impulsive spending. There is also the opportunity to partake in investments by investing in little bits that one can afford whilst still enjoying the same rate of return as a well co-investment option. Every option is vetted and secured by Piggyvest and you can easily monitor the progress of your investments. This is a Nigerian based app and accepts all Nigerian debit cards.

READ: What Nigerian banks consider before granting personal loans

3. YNAB short for, You Need a Budget, is a personal finance help app that teaches you how to manage your money. The general principle is to ‘give every dollar a job’. For a dollar saved, it is saved for a particular purpose which could be long term or short term. It strives to eliminate the common trap of living paycheck-to-paycheck. One of the pros of this software is that it displays the user’s financial reports and syncs transactions so that users can seamlessly categorise their finances at a glance. It has a more proactive rather than reactive approach to budgeting. For every dollar you’re expected to earn, work is assigned to it, that is, to either spend or save. With over a million downloads, it’s gained popularity with its educational and philosophical approach to financial management.
Works for both android and iOS devices.

4. Carbon: If you have ever been caught in a predicament where you needed just a small amount of cash to solve an emergency, but you probably thought it was not possible to access loans in such a short period of time, you’ll really love this bit of good news. There’s a mobile app that you can use to get that ‘small cash’ without stress and have the money deposited directly to your account in 24hours or less. That app is called Carbon. Formerly known as Paylater, this is a personal finance and loan service app that helps you make all sorts of bill payments and money transfer with ease. It is built to help users understand their spending habits and learn how to categorise income and expenses to have full control over their finances. With this app, you can get a short-term loan amount as low as #10,000 and as high as #500,000. In addition to making it easy to recharge your phone, transfer money and have access to short-term loans, it also provides users with the option to invest using Payvest and earn up to 16% per annum. Available on Google Playstore.

READ: Zoom reports a surge in profit of 3,300%

5. Expensify: This mobile and web-based application is developed from the world-leading expense management company of the same name. It was originally developed to make it bearable for anyone to analyse expense reports. It is a software that allows individuals and businesses to track and file expenses such as fuel, travels, etc. Just by snapping receipts of transactions, the software uses artificial intelligence to identify the details of the transaction and automatically categorise and save the expense. It also allows users to download these reports based on user transactions. The product offers two payment options for individuals and organisations; for either annual subscriptions or pay per use charge. One of the pros of this particular app is that you can easily convert currencies for international travel. It is compatible with android and iOS devices.

6. PocketGuard: This is a personal finance help tool that makes for a more simplified budgeting snapshot. It helps you manage your disposable income, bills, and subscriptions. While some other personal finance apps try to provide you with tools to discipline your saving and spending habit, PocketGuard simply shows you what you have available for daily spending. The software is built to help you manage your everyday spending after your regular bills and subscriptions have been paid. Upon sign up, the app syncs with your financial accounts and helps you keep track of your account portfolio. Using it to pay for services helps you stay ahead and negotiate better rates. With AutoSave you can automatically grow your savings to the desired amount.

7. Financial Calculator: This app is handy for calculating the future value and present value of your financial assets. Some of its features help you to; perform financial calculations with ease and on the go, compare interest rates, compare lease and auto loans, determine how much time is needed for you to pay off debts, and to calculate the exact tip you should give for services rendered.

8. Unsplurge: We’ve all been there at one point or another, where we felt the need to splurge sometimes on impulse and give in to personal cravings. But then when the utility has declined you start regretting your impulsive spending and berate yourself for not being disciplined enough. Well, with Unsplurge, you have an opportunity to discipline yourself. It is built to encourage you to save money by working on your goals. There is no limit to the number of goals you can decide to save money for. You just log savings and monitor your progress. You can also get inspiration and encouragement from family and friends as they cheer you on and share their success stories as well. This app is built only for iPhones.

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Explore the Nairametrics Research Website for Economic and Financial Data

9. Personal capital: This self-help tool basically offers two primary functionalities; a free personal money manager and a paid investment management service. The free function allows you to monitor your income, assets, expenses, and investments from a single portal, get investment advice on how to optimise and make more money, whereas the paid version which is also known as the Wealth Management program offers a more personalised portfolio management.

10. Mint: This is one of the most popular personal finance apps of all time. This app has been hailed for its easy-to-use programs and friendly user interface. With a sort of colour-coded system, it gives a more graphical display which helps users navigate the app seamlessly.

Explore the Nairametrics Research Website for Economic and Financial Data

Also known as intuit mint and formerly mint.com. This personal finance management app allows users to track bank, credit card, investment, loan balances, and a number of other transactions through a single user interface. One of the pros of this app is that it automatically syncs with your financial institutions to track user bills and gives constant alerts to ensure you keep up with payments. Based on financial data and transactions, its features allow users to create categories, track budgets, and set financial goals. It promotes savings by recommending credit card deals and insurance. The software is said to be securely protected, using a number of financial institution level security and high-level encryption. It was originally designed for iOS but an android version has been made available in recent years.

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MSME

FG to provide financial support for 1.7 million businesses, individuals in next 3 months

FG had announced specific programmes aimed at cushioning the impact of COVID-19 on MSME businesses.

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FG releases new details on MSMEs support scheme, budgets N200 billion for loans

The Federal Government has announced plans to provide financial support for 1.7 million businesses and individuals across the country within the next 3 months.

This disclosure was made by the Minister of State for industry, Trade and Investment, Ambassador Mariam Katagum, at the virtual commissioning of the Fashion Cluster Shared Facility for Micro, Small, and Medium Enterprises (MSMEs) tagged, Eko Fashion Hub, in Lagos.

Katagum disclosed that the initiative is borne out of the Federal Government’s continued commitment to helping cushion the devastating impact of the coronavirus pandemic on the economy by saving existing jobs and creating new job opportunities.

READ: FG releases new details on MSMEs support scheme, budgets N200 billion for loans

The minister said that President Muhammadu Buhari’s administration, through the Economic Sustainability Committee, had announced specific programmes aimed at cushioning the impact of COVID-19 on MSME businesses.

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She said, “The Federal Government is fully committed to empowering Nigerians; more so in the face of the COVID-19 Pandemic. In this regard, the government, through the Economic Sustainability Committee had announced specific programmes aimed at cushioning the impact of COVID-19 on MSME businesses.

“These programmes include among others, the N75 billion MSME Survival Fund and Guaranteed Off-take Schemes of which I have the honour to chair the Steering Committee for the effective implementation of the projects.

READ: NNPC reveals survival strategies to cope with the oil sector downturn and new normal

“The project, which will run for an initial period of three months, is targeting 1.7million entities and individuals and has provisions for 45 per cent female-owned businesses and five per cent for those with special needs. The registration portal for the schemes is set to open on Monday 21st September 2020 and I urge you all to take full advantage of the schemes.’

The Nigerian Economic Sustainability Plan which was produced by a committee headed by the Vice President, Yemi Osinbajo, is a response to the health and economic challenges which foisted on the country by the outbreak of the novel coronavirus pandemic.

READ: FG to save N1 trillion annually from petrol subsidy removal

Aside from developing robust monetary policies and fiscal measures to enhance oil and non-oil government revenues and reduce non-essential spending, the plan also includes a N2.3 trillion stimulus package for the economy.

Katagum said that the schemes were at the core of the N2.3 trillion stimulus package being implemented by the Federal Government. She said that the commissioning of shared facilities was also expected to provide succour and relief to the teeming micro-businesses in need of space and infrastructural support

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