Archive for May, 2009
Public relations is fundamentally the art and science of establishing relationships between an organization and its key audiences. Public relations plays a key role in helping business industries create strong relationships with customers.
Public relations involves supervising and assessing public attitudes, and maintaining mutual relations and understanding between an organization and its public. The function of public relations is to improve channels of communication and to institute new ways of setting up a two-way flow of information and understanding.
Public relations is effective in helping: * Corporations convey information about their products or services to potential customers * Corporations reach local government and legislators * Politicians attract votes and raise money, and craft their public image and legacy * Non-profit organizations, including schools, hospitals, social service agencies etc. boost support of their programs such as awareness programs, fund-raising programs, and to increase patronage of their services
Public relations in present times employs diverse techniques such as opinion polling and focus groups to evaluate public opinion, combined with a variety of high-tech techniques for distributing information on behalf of their clients, including the internet, satellite feeds, broadcast faxes, and database-driven phone banks.
As public image is important to all organizations and prominent personalities the role of public relations specialist becomes pertinent in crisis situations. Public relations agencies provide important and timely transmission of information that helps save the face of the organization. In the words of the Public Relations Society of America (PRSA), “Public relations helps an organization and its public adopt mutually to one another.”
Experienced public relations agencies have formulation press releases into which they can plug the company news, as well as a targeted list of publications for their industry. Truly good public relations agencies generally have a good working relationship with key reporters, boosting their chances of getting coverage. Some public relations agencies deal only with large, established clients, while smaller boutique public relations agencies specialize in certain areas.
At present public relations as a career option exists in private companies or government institutions that actively market their product, service and facilities. Public relations training courses are widespread in educational institutions. According to the U.S. Bureau of Labor Statistics, there were 122,000 public relations specialists in the United States in 1998 and approximately 485,000 advertising, marketing, and public relations managers working in all industries.
Most public relations practitioners are recruited from the ranks of journalism. Public relations officers are highly trained professionals with expertise and knowledge in many areas, for example shareholder management during a crisis, the evolving role of the in-house public relations professional, account management skills for public relations, an introduction to financial public relations, an introduction to consumer public relations, an introduction to public relations software etc.
It is not easy for small businesses to get small business loans. Banks and other lenders require them to go through strict and complicated financial procedures with stringent requirements for qualification. After everything, credit approval is not even guaranteed.
Even the financing for loans supported by the Small Business Administration (SBA) cannot meet the needs of the majority of small businesses. Although the amount of credit available for small businesses has reportedly been increased by 25% since March this year, it is not that easy to avail of the said small business loans.
Small businesses seeking small business loans should know how to prepare the right kind of business plans that banks are looking for. To justify the loan, they should be able to show the banks in detail how they intend to use the money in business and how viable their plan is. Experts say lenders have specific points which they scrutinize applications for and applicants should know these points and tailor their submitted business plans accordingly.
It is also said that loan applicants should first establish a strong relationship with the lending bank in order to increase the possibility of having a loan approved. Banks supposedly give more small business loans to businesses they have already known and trusted long term. Since small businesses are usually new businesses, this is quite difficult to do and it cannot be done in a hurry. How can a new small business with financial needs establish a good long term relationship with a bank in time to meet its current needs?
Another requirement of lending institutions from small businesses applying for small business loans is a good credit history score. A small business should first be deemed credit worthy by the bank before it can even be considered for loan approval. Again, small businesses that are stll young are at an immediate disadvantage here. How can they establish credit worthiness in time?
The US Congress has also placed Congressional restrictions on eligibility for the Small Business Administration loans. Small businesses first have to prove that they are at least two years old and are both struggling and viable at the same time. They should present proof that they have had a positive cash flow in one of those previous two years in business. They should, however, be currently struggling with “immediate financial hardship” with a decrease in income that should not be less than 20 percent. At the same time, they should submit their projections for cash flow for the next two years, proving that they will be able to meet loan payments.
A faster way to get small business loans would be through credit card services.
Any small business should have credit card services. Credit card services enable a company to accept customer payments for goods and services via credit cards or debit cards, whether over the counter in brick and mortar settings, through the phone or online. Credit card services provide the hardware and software for this.
Being able to accept payments through credit cards or debit cards can greatly enhance a small business’ income earning potentials. In addition to that, credit card services can provide the equivalent of small business loans with no need for any collateral. The amount of the small business loans are computed based on the average monthly income of the small business from credit card payments. The small business loans are then amortized through automatic monthly deductions of a certain percentage from the small business’ future credit card revenue. This means small businesses can almost automatically qualify for small business loans through credit card services, and will surely be able to pay such small business loans. Is there a faster way than this?
Traditional Underwriting
Time:
6 to 12 months
Cost:
$175,000 to $500,000. (The company will be out of pocket at least 50% of this amount prior to completion.
Capital:
Typically raises more capital than other types of transactions.
Problems:
Underwriting may be delayed or canceled. Issue Price may be changed by market conditions or underwriter.
Reverse Merger or Buy an Existing “Public Shell”
Time:
2 weeks to 60 days
Cost:
$150,000 to $400,00
Capital:
Does not raise money but stock is now valued and tradable
Problems:
Potential “skeletons” in acquired shell. Control shareholders of operating company may receive restricted shares.
Advantages:
Typically Reverse Merger or Public Shell Merger is the quickest way to get public. Non-control investors may receive registered or trading shares.
Merge with a Brand New Flex Financial Public Company
Time:
4 to 8 months
Cost:
$75,000 to $150,000
Capital:
May raise money and stock is now valued and tradable
Problems:
None
Advantages:
Public company can be “Custom Designed” to the operating companies specifications. Shareholders of operating company receive registered shares. New corporation so no “SKELETONS” in the company. Financial expertise during the transaction. Market support after the transaction. Automatic shareholder base friendly to the “Small Cap” market.
Preparation for a
Reverse Merger or Public Shell Merger
Locate a Suitable Public Shell – Public shells can often be found by consulting with securities law firms or CPA – Audit firms that deal with public companies.
It is important to start with a clean shell: Due diligence on the public shell cannot be over emphasized, advice from your securities counsel, auditors, and a financial consultant should be utilized. As was mentioned, many shells are created for the express purpose of merging with a private company. These shells have no predecessor entities, and, as a result, little baggage in the way of a business failure or other skeletons in the closets.
Comprehensive Business Plan – Potential investors, public shareholders, auditors, securities counsel, brokers and market makers will want to see a well documented business plan.
Strong Management Team – Public investors demand strong management teams.
Convincing Marketing Plan – Public companies need the ability to show good sales and earning growth.
Product or Service – Public companies should be able to develop strong or dominant position in their business segment.
Financial Audits – SEC qualified audited financial statements for your last two fiscal years.
Experienced Securities Counsel – Your attorney must be qualified to deal with regulatory compliance, and the ongoing reporting requirements of all public companies.
Have Public Company Experience: Your company should have at least one person in senior management that has significant public company experience. Financing consultants such as Flex Financial Group, can often assist management in the complex issues of being a public company and maintaining a good relationship with the financial community. In fact, many actually have a couple of shell corporations and, upon request, can manufacture a clean public shell. A made-to-order shell without the baggage of a business failure in its background can sometimes be the way to go, but there’s often a cost involved. You will most likely end up with the financing consultants as minority shareholders in the new company, holding between 2 percent and 5 percent. However, in almost any reverse merger transaction, the principals of the shell company keep a small equity position in the company going forward. Therefore, this surrender of equity is simply a cost of doing business.
Devise your financing strategy: A reverse merger is an indirect route to raising capital.
Entrepreneurs must first consider how additional capital will be raised after the deal is done. An experienced financial consultant can be very beneficial in this area.
Requirements Necessary to
Close a Reverse Merger or Public Shell Merger
Business plan of merger partner. Sufficient information to complete and file the required 8-K with the SEC.
Management information, including completion of the “Officer and Director Questionnaire,” for all Officers and Directors designated by the private company merger partner.
Agreement on structure and terms of merger.
Letter of intent with escrow payment made to public company or its principal shareholders. (This must happen for the public company to cease negotiations with other merger prospects.)
Audited Financial Statement, conformed to US, GAAP for the private merger partner. The audit statements of the private company have to be consolidated with the public company’s financial statements.
Agreed merger fee in escrow with the securities attorney representing the merger partner.
Consent from the majority, preferably 100%, of existing shareholders of the private company to merge or exchange their shares for shares of the public company.
Agreement for the Officers and Directors of the public shell to be replaced with the Officers and directors designated by the private company merger partner.
List of all shareholders in the private company that will make the share exchange.
Number of shares to be outstanding “post merger”, and a complete breakdown of share ownership post merger. Note: It is often necessary for the public shell to do a reverse split and/or cancel shares owned by the affiliates of the public share prior to completing the merger.
Agreement on state the company will be domiciled in post merger.
Satisfaction of warranties and representations between public shell and merger partner.
Designation of securities attorneys and SEC qualified auditors that will represent the private merger partner.
Preparation of the share exchange agreement, stock purchase agreement, definitive merger agreement, and all other documents necessary to complete the merger.
Final preparation of the 8K that is required to be filed with the SEC within 15 days of closing the merger. As stated earlier this is required to contain consolidated audited financial statements, but the SEC will allow an additional 75 days to file and amended 8K with the audited statements.
It has been our experience that the private company’s ability to deal with all these issues is instrumental in determining the timing in closing the merger, and the long term success after closing a reverse merger or public shell purchase.
Examples of Successful
Reverse Mergers with Public Shells
Armand Hammer, world-renowned oil magnate and industrialist, is generally credited with having invented the “Reverse Merger”. In the 1950s, Hammer invested in a shell company into which he merged multi decade winner Occidental Petroleum.
In 1970 Ted Turner completed a reverse merger with Rice Broadcasting, which went on to become Turner Broadcasting.
In 1996, Muriel Siebert, renown as the first woman member of the New York Stock Exchange, took her brokerage firm public by reverse merging with J. Michaels, a defunct Brooklyn Furniture company.
One of the Dot Com fallen angels, Rare Medium (RRRR), merged with a lackluster refrigeration company and changed the entire business. This was a $2 stock in 1998, which found its way over $90 in 2000.
Acclaim Entertainment (AKLM) merged into non-operating Tele-Communications in 1994.
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