 |
|
|
|
|
 Summary of chapter 40 : Choice of corporate structure
• employee-shareholders. Normally these shareholders are loyal and non-volatile, lending a degree of stability to the capital;
• family shareholders. This model is in decline. New industries require too much capi\-tal for a family-owned structure to be viable. Funding requirements make capital markets become increasingly important;
• financial investors and investment funds, whose objectives vary: business angels, LBO funds, institutional investors, venture capitalist, etc;
• governments whose importance is rising due to sovereign wealth funds mainly originating from emerging markets.
Listing a company on the stock market enables majority shareholders to increase the liquid\-ity of their shares but, in return, it requires them to submit their strategy to the scrutiny of the financial community. Defensive measures for maintaining control of a company's capital carry a cost, because they prevent investors from taking advantage of the potential opportunities a takeover might offer.
These measures include:
• separating management control from financial control through double voting shares, holding companies, limited share partnerships, investment certificates and non-voting shares;
• controlling shareholder changes through right of approval clauses or pre-emption rights;
• strengthening the position of loyal shareholders by carrying out reserved capital increases, buying back shares, merging, encouraging employees to become shareholders and issuing warrants;
• exploiting legal and regulatory opportunities: specific regulations, voting rights limitations, and poison pills.
Tax considerations aside, whether a group is made up of subsidiaries or divisions depends on control and organisational factors. Listing certain subsidiaries gives the group access to additional equity capital without changing the shareholder structure of the group. But such carve-outs risk transforming the parent company into a financial holding company.
Lastly, remember that shares with low market liquidity, shares of a holding company or conglomerate, or shares without voting rights, often trade at discounted values. These discounts increase the cost of capital.
INDEX
|
|
|
Legal mention -
Contact -
Site map
|
|
