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Driving the Capital Agenda - Investing Capital - Ernst & Young - New Zealand

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Driving the Capital Agenda

The Capital Agenda - Investing Capital 

Investing Capital

Preserving Capital | Optimising Capital  | Investing Capital  | Raising Capital 

Investors in your organisation want to know why: why this transaction, why at this price and why now? Complicating matters, differing stakeholders increasingly bring differing expectations of investments as well as timelines for returns.

Investors today are more closely scrutinising the investment of capital. As a result, businesses must work harder to define and communicate the value proposition and/or potential synergies of capital investment decisions. They must demonstrate in-depth and varied scenario analysis around investment decisions, as well as detailed integration planning.

In response to these pressures, leading companies are implementing a range of actions. They’re considering a wider range of strategic options, developing tailored stakeholder communications, and they’re focusing due diligence efforts on key drivers that will enable them to realise opportunities and mitigate of risks.

• Evaluate investment opportunities
Identifying the right investments and putting clear due diligence, integration and risk management plans in place is essential to successful investing..

• Perform scenario analysis around investment decisions 
Effective scenario modelling helps to develop and refine the value proposition and/or potential synergies of capital investment decisions.

• Identify opportunities and integration planning
Speed to value starts with highly focused pre-investment planning and due diligence. An enhanced focus on operational and commercial due diligence to challenge revenue and cost synergies allows for improved realisation post-investment.

• Mitigate risk and validating investment drivers through due diligence 
The increasing complexity of investments highlights the need for more focused and thorough due diligence. Companies with the ability to perform highly focused due diligence leveraging strong sector insights will gain competitive advantage.

• Evaluate investment structures
Capital investment decisions are not strictly limited to acquisitions. Alternative mechanisms (such as JVs or partnerships) may allow companies to invest capital with less risk.

• Uncover cash in tax 
It’s almost unavoidable that in challenging times, companies will wind up with less than efficient tax structures and practices. As such, wise businesses are reviewing their tax strategies to reduce expense and uncover liquidity.

• Manage heightened expectations 
Effective communication to stakeholders is essential to gaining and maintaining investor confidence. While all stakeholders will need to understand the key business drivers and the value story surrounding an investment — stakeholders will have differing expectations of investments as well as varying timelines for returns.

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