BusinessMagazin

Tag: money

  • How much do you have to make to invest on the Stock Exchange?

    There are over 100,000 investors on the Bucharest Stock Exchange. Many of them are ”voucher holders” and ended up on the Stock Exchange after the mass privatisation process carried out in the late 90s, when the privatisation vouchers were turned into shares in listed companies.

    Therefore, the number of Romanians who headed for the Stock Exchange seeking a source of profit or income for the retirement years is relatively low. The main factors keeping Romanians away from the Stock Exchange are the low income and the lack of a financial education and discipline. ”One can start an investment on the Stock Exchange even with an average income of 500 euros per month. About 10% of this sum can go to the Stock Exchange. It is not a lot, but it’s a start. One should keep in mind, though, that an investor should not think that if they start out poor today and invest on the Stock Exchange, tomorrow they’ll be rich,” says Nicolae Pascu, chairman of brokerage company STK Financial.

    ”The Stock Exchange is open for anyone. Technically, there are no income barriers, but one basically needs around 500 euros in monthly income to invest on the stock exchange,” says Razvan Pasol, president of brokerage company Intercapital Invest. Perhaps even more important than the income are the savings of the future investors. More specifically, the money that investors can dispense with for at least a year or two, for which they have no plans, and, more importantly, the money they can afford to lose. This has been confirmed by the financial crisis, which led to shares falling by over 50% in certain periods. ”It matters less how much you make per month, what counts more is how much you can save. I would say 40 to 50% of the money left after all expenses are paid should go to the Stock Exchange. If the available cash amounts to less than 100,000 euros, it is rather difficult to make a stock exchange investment,” says Rares Nilas, president of BT Securities.

    TRADUCERE DE LOREDANA FRATILA-CRISTESCU SI DANIELA STOICAN







  • Cash is King

    The trouble is that all companies are trying to put off their own payments as much as possible and collect money from clients even in advance, if possible, although this is now very seldom achievable, due to the financial blockage. But can companies avoid this blockage although their sector is affected or will one player defaulting on its payments cause a chain reaction?

    Marius Ghenea, an entrepreneur who prefers to invest in start-ups, and has eight companies in his portfolio, says a company with losses and a positive cash flow is more solid than one which makes a profit, but which has its cash blocked, and is unable to pay its employees and its debts (most Romanian companies finance their operations via loans). In order to maximise cash inflows and minimise outflows, Ghenea believes the firm needs to increase sales and cut costs.

    Although it sounds simple, it isn’t. Sales should not be boosted at all cost: if the markup is cut too much, companies and entire sectors can be hurt. Cost cuts are also problematic, because such measures can generate significant subsequent costs; for instance, layoffs can give rise to immediate compensatory costs – i.e. unwanted expenses. Ioana Constantinescu, general manager of Chimtotal, in turn believes there are strategies to avoid a liquidity shortage. It is essential to keep a firm eye on the cash flow, especially the forecast one.

    ”We should be able to keep a strict record both of payments made to us and by us.” The company, a distributor of raw material for the cosmetics and the furniture industries, ended last year with 700,000 euros in turnover. Now, payments tend to be about two weeks late, and Constantinescu is getting increasingly more requests for a rescheduling of payment, especially when large sums are involved, but, at least for some products, the company is not willing to accept late payment. The explanation for this is that, although for the time being the balance between sums coming in and those going out is reasonable, both in terms of value and in terms of deadlines, there is always the risk, including for a profitable company, to default on its payments. One thing is certain right now: not all companies have a strategy that can shield them from problems, so the advantage of those that have a ”map” to avoid a liquidity shortage is all the more important.

    Traducere de Loredana Fratila-Cristescu si Daniela Stoican

  • The centre is where the money is

    Doru Bostina, the managing partner of Bostina and Asociatii is one of the few lawyers that have bet on the potential of the markets outside Bucharest. For most law firms, smaller cities did not seem attractive, either because the services needed there were too simple to be of any interest to them or because the financial effort territorial expansion would have entailed was too great. ”Those that stuck in the cliché that big deals are only closed in Bucharest were not paying enough attention,” Bostina said during a conversation with BUSINESS Magazin.

    Of the ten biggest Romanian law firms, only three – Tuca Zbarcea & Asociatii (TZA), Nestor Nestor Diculescu Kingston Petersen (NNDKP) and Bostina si Asociatii operate offices outside Bucharest, too. With 15 local offices that cover all the important regions, Bostina si Asociatii is the leader in terms of territorial expansion that started a few years ago, when few lawyers would look beyond the Capital. ”They should have opened their eyes and seen how many big and mediumsized companies had been reborn after privatisation or after the recession between 1997-2002,” Bostina says. In his case, 10% of the turnover of the last two years was generated by the territorial offices; though it may seem a little at first glance, ”the current crisis may very well diversify and boost demand for business law advice in the rest of the country”.

    The reasons why going beyond the borders of the Capital may turn out to be a winning bet for lawyers, even though it is not profitable on short term, start with the fact that in Bucharest, the centre of many businesses, the most profitable industries as far as lawyers are concerned are frozen for the time being. Law in the big cities, on the other hand, is mostly a ”courtroom” business, and very little of it is done in form of consultancy. ”Naturally, the absence of demand has created a gap in terms of development of consultancy skills and its specific techniques compared with Bucharest,” says Adriana Gaspar, senior partner of NNDKP and managing partner of the Timisoara office. That is why she believes that some clients prefer to receive advice in Bucharest about their businesses in the country.
     

    Traducere de Loredana Fratila-Cristescu si Daniela Stoican
     

  • Come get the money

    ”If I knew where to find 200 million euros now, I would have no trouble investing them tomorrow,” says Dragos Cabat, managing partner of consultancy and financial brokerage firm Financial View Consulting, referring to the requests for funding that he gets from his clients. It is true that some of the applicant companies are ”hard to finance”, because they pose a greater risk to investors, Cabat admits, ”but many of them are good companies, with solid business plans.

    ”The increasing need for cash of the companies the consultant is talking about can be easily explained in the current economic context. On the one hand, the entrepreneurs are faced with an economy affected by increasingly more constraints: flows of cash among partners are choked, payments are delayed, orders and sales are going down, due loans are harder to repay. On the other hand, most bankers are no longer willing to grant them new loans and even reduce the lines of credit they approved in the past. Under the circumstances, the offer of the private equity firms, investors that buy into a company, help it develop with funds and know-how for a while and then sell their stakes for profit, is becoming more and more interesting. For many years, entrepreneurs had been reluctant in accepting the offers of portfolio investors, partly because they were doing well and prospects were good, while a partnership with an investment fund would have meant losing independence in the running of one’s business.

    Things have changed now. Even though the economy is going through a rough period, private equity firms are not doing bad at all: whereas in the past years they could miss a lot of deals because entrepreneurs could get loans from banks, today, a series of old talks could be resumed, says Cornel Marian, chief executive of Oresa Ventures, a Swedish private equity fund and one of the biggest in Europe that has been present in Romania for over ten years. Now that bank loans are either frozen or too expensive to get, and the stock market is no longer a solution to raise capital, investment fund managers can afford to be more selective than ever. Beyond the abundance of companies in need of financing, good deals are hard to find and conditions imposed by investors are not easy. The basic criterion is not the price of a company, but the profit that can be made from it in the future.

    ”No company is cheap enough if it’s a bad company,” says Mihai Sfintescu, manager of 3TS Capital, which operates two funds in Romania, 3TS Central European Fund II (100 million euros in capital) and 3TSCisco Growth Fund III (30 million euros). Although selling their business for a competitive price is very difficult for entrepreneurs now, the funds cannot be sure they will able to sell their stakes for profit in two or three years, either. However, if entrepreneurs (or some of them) are not willing to take a lower price, the investment funds are in no rush, expecting the number of opportunities for cheap deals to increase as the problems of companies worsen. The investment funds that sit and wait for opportunities might find out that they missed out on good deals, especially if the bank financing option becomes available again to entrepreneurs. Or maybe the deals are already happening ”silently”, after all, as Marius Stancescu, chairman of consultant and M&A broker Riff Holding, says: ”The sale is a difficult moment, which can affect the commercial relations with clients or suppliers, with business partners, therefore it is only natural that most such deals should be made behind closed doors.”.