TORONTO, April 8 /CNW/ - The lack of confidence in the global financial
systems is forcing financial institutions to be more cautious about lending.
According to PricewaterhouseCoopers (PwC), in this volatile market, private
companies need to be proactive in managing their balance sheets to ensure
continued liquidity and access to capital so that they can be in a position to
take advantage of opportunities the market presents.
"The general market conditions for loans are obviously not what they were
a year ago," says Michael Vermette, partner in PwC's Corporate Advisory and
Restructuring practice. "This new reality is lost on many private companies
who look at their strong balance sheets and positive cash flows and view
themselves as immune to the credit crunch. Private company leaders need to
recognize we are in unprecedented, unstable markets - and avoid overlooking
the importance of liquidity."
Vermette adds, "At the same time, a volatile and uncertain economic
environment often presents unexpected opportunities: moving in on markets held
by under-performing competitors, buying up cheaper real estate or acquiring
struggling companies. But to seize these opportunities, private companies have
to be in a position to act fast."
To ensure businesses have the liquidity they need to manage cash flow and
working capital, Vermette offers these strategies for private company leaders:
- Shore up any access to cash that you have. Short-term investments
should be extremely liquid. If you can do anything to monetize assets
on your balance sheet, do it.
- The same goes for credit. Whatever credit you have access to, lock it
in for as long as you can and don't worry about the cost.
- Look beyond the usual suspects for funding. Explore all your options
including banks, private equity, asset-backed lenders,
distressed-based funds and strategic lenders.
- Look at operations with an eye to whether they are profitable and
produce positive cash flow. Operations that are cash neutral may have
substantially higher value to the organization if they can be
monetized and the cash put to other uses in the operations. If the
operations are not cash positive, urgently consider your strategic
- For the foreseeable future, the most important business decision will
be to manage the liquidity and capital structure of your balance
- Talk to your advisors. The businesses that will benefit the most for
the next several quarters will be those with the most liquidity. The
more liquidity, the more opportunities - regardless of what your
business is and regardless of what your longer term business
The full article can be found in the "Let's Talk About" section at
www.pwc.com/ca/businessinsights. This series of articles from PwC's Private
Company Services group helps business owners think about topical issues and
opportunities that can affect the performance of their business.
PwC Economic and Credit Crisis Task Force
PwC recognizes that a global crisis requires a global and coordinated
The PwC Economic and Credit Crisis Task Force (the "PwC Task Force")
brings together a Canadian team of senior cross-functional experienced
practitioners who understand market volatility and the diverse challenges
facing companies today. By leveraging knowledge, experience and networks, the
PwC Task Force can advise and guide Canadian companies through a multitude of
capital market and economic crisis issues.
For more information please visit: www.pwc.com/ca/managinginadownturn.
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