Assume that you have recently joined a family owned renewable energy company in the UK and your first task is to advise the board on appropriate funding sources to secure the 100m that the company requires to fund a new investment project.
You have been asked to provide a report detailing the various funding sources available to the company to secure this level of funding. You have been further advised that the existing owners are all engineers
and as such your report should also include a glossary of terms.
Presently the firm has no debt and the shares of the firm are held privately by five brothers each holding 20% each. All of the brothers recognize the need to secure outside funding but are naturally nervous about the potential dilution of power. Note further that this may just be the initial round of funding and the owners are keen on options that provide subsequent access to funding at a later date.
Essentially the firm has to choose between debt and equity. However there are many different variants of each of these funding options. In addition to this it is no longer the case that a company would float on the stock exchange closest to where they are geographically located (see recent cases of luxury brands "floating" in Asia). In addition both options offer different characteristics regarding subsequent capital raising and their role in management motivation and incentive.
Your assignment should demonstrate the following qualities:
1. An in depth understanding of the available funding opportunities facing the company. These should be supplemented by exs.
2. Recognition of the issue of the reduction in "power" and how this could be mitigated.
3. Recognition of the pro's and con's of debt versus equity with regard to on-going funding.
4. Acknowledgement that both debt and equity comes in a variety of different forms. Again, these should be supplemented by exs.
5. Written in such a manner that a non-subject specialist (such as an Engineer could understand)
6. An understanding that market for IPO's has become a global one. Again, supplemented by exs.
7. An understanding of the potential role in each of these in funding channels in motivating management (if any).
8. Clear evidence of personal research and links to real world exs.