Should Michel Kripalani seek external financing – either debt or equity – to fund Ocean house Media’s growth? Why or why not?
External funding is considered unnecessary and hardly difficult to acquire for the ocean house media company. The company’s performance from its establishment in 2009 to 2013 is seen to reasonably good. For four years of its operation, ocean house Media Company can operate with external financing because of the existing barriers of lack of assets that can serve as securities for external funding.
Within the four years of operation from 2009 to 2013, the company’s compounded annual growth was 200%. Kripalani being able to deal with a yearly growth of 200% within a long-run period of four is clear evidence that he does not need any external funding. The 5% growth rate experienced in 2013 can be considered a result of the changes evident all over at certain times during economic recession and uplifts. Ocean house Media Company’s income forecast shows that it is better positioned to boost its app revenue from $12 billion in 2102 to over $60 million in 2017. This is possible through the strategies that Kripalani has developed to reduce operation costs (Yifei & Yanchun., 2017). For instance, the company uses contracted employees instead of salaried employees, which gives the company a competitive advantage over its competitors. This makes the ocean house Media Company be in a position to operate effectively and ensuring continuous growth without the need for external funding as it has worked before.
Evaluate Ocean house Media’s exit options at year-end 2013. How would you value Ocean house Media at year-end 2013?
Ocean house Media Company has many exit options that can be adopted at the end of 2013. The exit possible exit strategies aim to reduce the cost of operation for the business and secure the investor from a future financial crisis. The strategies aim at reducing present financial cost obligation and also future losses in case of business failure. Moreover, the exit strategies work to ensure financial gain in case of business success. In this case of ocean house, Media Company Kripalani can adopt three possible exits strategies: strategic acquisition, initial public offerings, and management buyouts.
Kripalani can consider involving competing companies in an acquisition. Entering into an addition helps the ocean house media company reduce its management cost contrarily when operating as an independent company. Moreover, the ocean house media house can consider issues its shares to the public. The company can sell the majority of its shares to the public and remain with a few shares. This will reduce its cost of operation and reduce the risk of loss in business failure and enable Kripalanin to get some proceeds from the business in the chance of its success.Furthermore, Kripalani can also adopt management buyout options. The management buyouts operate the business on behalf of the Kripalani. In the event, the company faces financial crisis, the management buyouts acquire the ownership of the company.
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Yifei, G., & Yanchun, X. (2017). The Impact of Analysts on External Financing Structure of listed companies. Finance & Economics, 11.