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capital raising and strategic investor

Capital Raising

Why and when to look for investors or shareholders?

There can be several situations in a company that put on the table the possible search for financial investors or strategic partners through capital increase or other forms. One of these situations is when the company is entering a growth phase that requires an investment that it is not able to afford with its own resources. For example, in order to continue growing, the company may consider an internationalization strategy or an investment in the development of new technology that requires a lot of R&D work. 
search for investors
Instead of increasing liabilities with long-term debts, external investors can be sought for such investment projects. To initiate a search for investors, it is important to have a defined strategic plan of the project to be financed. The expected value of the project must be higher than the amount of the capital the company want to raise.

Capital increase

What is a capital increase and how does it work?

A capital increase is a financial operation that increases the company's equity through the issue of new shares or participations and the entry of external investors in the capital.

The new capital does not represent a debt for the company and the risk assumed by the new shareholders is the same as that of the current shareholders. The position vis-à-vis potential creditors is improved due to the increase in equity.

Unlike a bank loan or other financing, the capital increase does not establish repayment deadlines. On the other hand, its cost will always be higher than the debt because the risk assumed is greater than that which a bank will assume.

How does a capital increase affect existing shareholders?

In a capital increase with new shareholders, new shares are issued, which means a dilution of the old shareholder's stake. This means that their control over the company decreases.

On the other hand, the value of the company in a capital increase is increased. This increase in value is equal to the amount of capital injected by the new shareholders. Therefore, the value of your investment is not affected at the time of the capital increase.

What kind of partners or investors can inject capital into a company?

When a search for inverter or strategic partner, there are different types of investors or partners who can inject capital to carry out the growth project that is being considered. Depending on the type of project, a certain type of investor may be more favourable or one type of investor than another:

Financial investors

  • Private Equity or Venture Capital: It's an investor who usually has expertise in the sector or even has a 100% focus on a specific sector. It aims to grow the company through a temporary investment based on a growth plan that requires capital to carry out the plan.
  • Investors that base their growth on acquiring other companies: These are companies that grow by "bundling" other companies with proprietary solutions and that operate in specific verticals. They make long-term, continuous investments. 
  • Search Funds: These are funds that seek to own a single company in order to invest in and manage it. Transactions are carried out through majority buy-out operations. They solve the problem of lack of succession in many companies. 
  • Family Offices: An investment group that manages a family's wealth. Its investment focus is very diverse and often has the possibility of flexible approaches.

Strategic or industrial partners

  • Strategic technology investor: This is an investor who operates in the sector and knows it. In general, he/she is interested in a long-term investment with the objective of keeping the company within the group. The key factor deciding the investment is the synergies that can be created between the two companies. 
  • Non-technology companies: These are companies from other sectors that invest in a company for the growth of their own business. Often the acquired company has some kind of technology or know-how that is of special interest to the investor. .

Search for financial investors

How to find new financial investors

The search for an financial investor for the capital increase is a process that can be long and requires a lot of dedication. You have to find the investor that best fits your business idea and strategic plan. It is advisable to have someone who has experience in this type of process and to prepare the best way to prepare the financial investor search strategy.

As a prior step to defining this investor search strategy it is important to have a well-defined plan for the growth strategy. All aspects such as objectives, investment cost, investment time and return on investment, expected profitability, human capital involved, etc. must be considered. Before making the decision to invest in a company, the investor will review all the details of the business or growth plan to be achieved and must therefore be convinced with a good strategy. 

It should be borne in mind that what an investor is looking for in a company is to achieve his own objectives in return for making his capital available. These objectives are not always limited to achieving a certain return on the investment made and are specified during the process of discussions with the investor.  

Before starting the search, it is necessary to see what type of investor is the most suitable for the objectives set out in the strategy. For example, in the case of a strategy to enter a foreign market, it may be advisable to look for an investor or strategic partner that has knowledge of the market or can even provide operational support for the entry.  

Searching for strategic investors

What is a strategic buyer?

Unlike a financial investor, the strategic partner has a longer-term investment vision and always seeks objectives beyond the return on investment. In their contributions, they do not limit themselves to injecting capital, but also contribute know-how, technology, patents, commercial network, infrastructure, etc., which help the company in which they invest to achieve its growth objectives.  

The strategic partner shares resources, competences, risks and long-term benefits and therefore has a long-term commitment to achieve specific objectives.  

We answer your questions as corporate finance experts 

Many entrepreneurs and managers are hesitant to raise funds in line with the defined strategy and to implement capital structuring objectives: 

  • Funding strategy: How do I maximise value for the shareholder and all stakeholders? What is the optimal point of return and risk
  • Identifying and evaluating options: What sources of financing (debt or equity) are available? Which one is best for me given my company's growth expectations
  • Doing the deal: How do I get the best terms? How do I make my investment proposal more attractive to attract the best capital?
  • Close: How do I manage communications with the operation's stakeholders? .
  • Ongoing communication with management and stakeholders: How do I manage communications with stakeholders to maintain the support of funders and shareholders?

Why Baker Tilly Global Deal Advisory?

Baker Tilly International is a Top 10 ranked professional services firm, with a strong focus on the Mid-market, offering global reach and regional support, specialised service teams, and extensive experience in high-growth sectors. 

Thus, in Baker Tilly Global Deal Advisory as a centre of excellence in M&A we offer you the best service based on the following pillars: .

Training & Methodology
We continue to strengthen our existing competencies and aggressively invest in skills that enable our clients to make better capital attraction and deal optimisation decisions.  As a result of our work with companies in high-growth sectors, we have gained knowledge and experience in how to make an investment opportunity in a high-growth company attractive to different types of investors.
Data Analytics for M&A
Our Intelfin tool helps you understand and improve your strategy to identify the opportunities and risks hidden in the data. With rigorous modelling, we provide investor visibility on the competitive environment by reducing uncertainty.
Market Research
Our market analysis capacity, from the investment point of view, allows us to provide a personalised vision of the company and its market of action.

Our research team is constantly analysing high-growth markets, helping to identify those strategic partners who can contribute the most to your company's future growth.

Discover How to ...

Market Research Technology
Our team of market analysis specialists is continuously analyzing the investments of the most active markets in the industry in order to unceasingly contribute ideas of the current market situation and identify the most relevant trends for senior management. We integrate the most relevant sources of information which allows us to discover the most interesting companies for venture capital and similarly helps us to identify the investors with the highest probability of involvement in an M&A process to ensure the success of our sell-side operations.

The reports and deductions of our advisors provide a broad view of the sector, both geographically and from the complementary or adjacent markets perspective.
Technology Data Analytics
for M&A
Advanced data anlytics is a weapon". Intelfin is an artificial intelligence tool we use for investing and creating value in SMEs through competitive analytics and the enterprise environment.

IntelFin consists of a cognitive system, which, through the application of advanced analytical technologies, facilitates the automation of investment and financing decisions in the field of non-listed companies and especially SMEs in high-growth sectors.

The information related to these companies is characterized by their lack of transparency and heterogeneity; thus, it is necessary to develop an advanced analysis which is as much predictive as prescriptive and is developed in a natural language custom, suitable to obtain greater clarity and knowledge of the investment scope.

The IntelFin system focuses especially on analyzing the variables that define and influence the competitive environment of a sector and the positioning of a company, analyzing their influence on future value creation. Therefore, IntelFin supports strategic decision-making to senior management by resolving questions such as:

¿What are my competitors' priorities, strategies and expansion plans? Who's my competition? Which competitor is most likely to grow at a higher rate?
Which areas of activity/business models will receive the most investment? Which sectors are most attractive to investors?
Which companies are going to experience the most growth in the near future? Which companies are most likely to receive investment or be acquired?
Training Methodology
We have developed training programs in an innovative set-up which guarantees our teams the acquisition of technical competences both in the field of corporate finance and in the field of psychology, that is much needed when it comes to negotiation processes.

We have a culture of continuous improvement of our processes, closely related to the use of information systems that allow the enhancement of internal communication between our teams, as well as external communication with our customers. Hence, we extend best practices identified internally in an efficient and rapid manner among our members.

Are you one of those who prefer to be well informed when making decisions?