Game 1 of the NBA Finals, a rematch of last year’s duel between the Golden State Warriors and the Cleveland Cavaliers, kicked off Thursday night with the Warriors coming away with a decisive 104-89 at-home victory over the Cavs.
While the league’s two most popular players, Lebron James and Stephen Curry, battle it out on the biggest stage in the post season, not making it to the finals isn’t the only thing that is causing some elite NBA athletes to feel excluded. Case in point: New Orleans Pelicans forward Anthony Davis is widely recognized as an elite rising star in the NBA, yet last Thursday the NBA announced Davis would not be selected on any of the three All-NBA teams. His pride was probably wounded by the news, but his wallet took the biggest hit.
Davis had a clause in his contract that would award him $24.8 million as part of a requirement for the “Rose Rule.” Davis needed to make one of the All-NBA teams in order to complete requirements for a big bonus.
The Rose Rule stipulates that a player coming off his rookie contract is eligible for a higher raise structure if he accomplishes two of the following: wins MVP, is selected as an All-Star starter, or is selected for All-NBA. Earlier this year Davis was not selected as an All-Star starter after an injury-plagued season with the Pelicans, and was questionable to make the All-NBA team. Now that the NBA announced the official rosters for the three All-NBA teams, which did not include Davis, he will not earn that extra $24.8 million.
Davis’ five-year deal is now worth $121 million, instead of a possible $145 million. Davis, the No. 1 pick in the 2012 NBA Draft, was a member of the 2014-2015 First-Team All-NBA squad. Had his rookie contract been up last year he would have earned the $24.8 million he missed this year.
While the devil is always in the details, what a missed opportunity for Davis!
Whether a player contract or an M&A transaction, every negotiation is unique and needs to be approached with the proper strategy and insight. Talley & Company is uniquely equipped to provide the technical and managerial expertise to help you plan, negotiate, structure and execute on your acquisition strategy.
Tesla’s CEO Elon Musk is one of the more ambitious entrepreneurs the world has ever seen, routinely drawing comparisons to Steve Jobs, with some even putting him ahead of the late Apple co-founder and CEO. Now Musk is trying to accomplish something few manufacturing companies could ever dream of: Musk recently announced plans to ramp up capital expenditures to support an incredibly aggressive plan to increase the current production capacity of 20,000 vehicles in the current quarter to 500,000 per year by 2018.
“It’s not a question of demand,” Musk said. “Demand is not our issue, production is our issue. We have more demand than we can address and levers we can pull to increase demand, and we’re not doing it.”
Musk’s point was that if Tesla engaged in conventional advertising (they do very little advertising outside of PR events), it could increase demand, but its more prevalent issue now is being able to produce its cars, and build them well.
“It’s worth saying that making one of something is quite easy,” Musk said. “Making lots of something consistently that’s going to last a long time is extremely hard. In fact, it is way harder to make the machine that makes the machine that it is to make the machine in the first place.”
From his perspective, Tesla has people lining up around the block to buy its cars and is far more worried about being able to build the vehicles and properly support them than it is about seeing demand drop off.
Scaling is hard. As many seasoned entrepreneurs will tell you, once you’ve achieved a certain level of success (it might take form of earning a few million in revenue, hiring more than 10-20 employees, etc.), the hard work really begins. A business in growth or scale mode faces a whole new set of different challenges and opportunities that may require a change in attitude and approach. Your ability to recognize this can mean the difference between spinning your wheels and achieving your next milestone.
Talley & Company understands the challenges facing entrepreneurs with generating and protecting income. Whether you’re looking to improve your profitability, build your brand through a business transaction or capital raise, Talley & Company is the consulting and financial services firm dedicated to strategic business solutions that deliver meaningful results.
John Elway: 2004 Inductee to the Pro Football Hall of Fame. Back to back Super Bowl wins. It would be hard to argue that the number one pick of the 1983 NFL Draft did not have an illustrious career as a football player. One thing he wasn’t quite as good at apparently though, was investing his money.
Back in 1998, Broncos owner Pat Bowlen proposed a no-brainer deal to Elway. In the deal Bowlen offered Elway the right to buy a 10 percent share of the Broncos for $15 million. But that wasn’t all. Elway would also be given the option to buy another 10 percent of the franchise by forgoing the deferred salary Bowlen owed him on the condition Elway would become a special assistant to Bowlen, which would lead to a COO position. The amount of deferred salary on the table? $21 million.
If Elway wasn’t pleased with his investment in the Broncos, Bowlen offered him the opportunity to back out by selling back his interest in 2-5 years for $5 million more than the original purchase price. In addition, Elway would receive eight percent interest on his investment a year. He would also have right of first refusal to buy any other stake in the team if the family sold to another interested party.
So, what did Elway decide after having nine months to mull over this seemingly no-lose deal? He walked away from it and decided to invest his money elsewhere, often with mixed results.
Fast forward to 2011: Elway is named Executive Vice President of Football Operations and General Manager for the Denver Broncos but has no stake in the franchise. According to a Forbes estimate, the 20 percent stake he passed on, based on a Forbes 2015 valuation of the team at $1.94 billion, is now worth $388 million, which would have been a whopping 646 percent return on the 1998 investment, adjusted for inflation, had Elway accepted Bowlen’s offer.
While only John Elway and his closest advisors can say for certain why he would pass up what seemed to be a “touchdown” deal, it sounds like he fumbled the snap on a very good investment opportunity.
Founded in 1989, Talley & Company is the premier consulting and financial services firm dedicated to advising high net worth individuals and their closely held entities with the strategic business solutions that deliver meaningful results.
15 Jan 2016
Depending on where you call home, you may have noticed lately that more and more items ordered from Amazon.com are being delivered by fleets of white trucks with the Amazon logo emblazoned on their sides. In a move signaling a bigger push into the shipping industry, Amazon is expected to acquire French shipping company Colis Privé, as part of a plan to go head to head with FedEx, UPS and DHL according to The Seattle Times.
Amazon’s acquisition of Colis Privé is part of a bigger move by Amazon to rely less on multinational shipping companies to ship their products. The potential benefit of owning the shipping network could potentially have a substantial impact for Amazon’s bottom line when taking in account rising shipping costs. In 2014, the company spent over $8.7 billion on shipping, up from $6.6 billion in 2013. It seems likely that after managing the logistics of its core revenue-generating, Amazon could then extend their logistics capabilities as a service to other organizations.
This move would not surprise many, as Amazon is no stranger to disrupting industries. What started as the computing infrastructure that powered the company’s website (the largest retailer in the world) became the building blocks to what would transform into the biggest business in cloud computing by far. Amazon has transformed the way organizations utilize computing power by allowing clients to purchase computing power on an hourly basis which is ideal for projects whose capacity needs fluctuate at certain times.
With the pending acquisition of Colis Privé, Amazon appears ready to disrupt another industry.
Growth through acquisition, is often mistakenly considered the exclusive domain of the largest companies. However small and midsize company looking to achieve substantial growth can benefit just as well. For more information about how Talley & Company can help you plan, negotiate, structure and execute on your growth strategy, contact us today.
21 Aug 2015
Connecting Entrepreneurs to Capital
Roughly seven years ago, the economy dipped into a deep recession and the ensuing “credit crunch” made it difficult for many small businesses to secure the capital they needed. Banks effectively closed the door on many small businesses seeking capital that did not fit their “deal” requirements. Seeing an opportunity, many alternative lenders jumped into the marketplace, willing to provide capital at a time when traditional lenders were reluctant to take on risk. Fast forward to today: the rise of online and marketplace lending means small business owners have access to more options than ever to fund their strategic growth objectives. So what’s the right choice for your business? The answer might not be so simple.
Much like first time home buyers trying to pick the right loan for their mortgage, many business owners are overwhelmed by the countless options available in the capital market. So many choices can lead to a lot of confusion. Some lenders will talk to you about APR, others will offer you a short-term cash advance, and more will throw in various hidden fees that may be difficult to discern from all the details –and the list goes on and on. Taking into consideration all the variables, the real challenge is not merely finding financing or capital resources, but ensuring they are a good fit for both you and your organization’s needs.
For over 25 years Talley & Company has managed complex financial transactions that maximize value for our clients while earning their trust and building a strong network within the banking and private equity industries. Securing financing or capital resources can be a complex process. Structuring a favorable deal requires extensive knowledge of debt and equity capital markets and sources, the analytical skills to compare competing offers, and the transaction expertise of a knowledgeable advisor to maximize after-tax value. Talley & Company can help you develop your best financing options, identify prospective banking institutions or private equity groups that fit your deal, and work with you diligently to obtain the capital that is suitable for your organization’s unique needs.
For more information about how Talley & Company can help you plan, negotiate, structure and execute on your growth strategy, contact us today.
In a landmark agreement, Iran and six world powers have reached a deal to lift sanctions that have been in place for 12 years, in exchange for the nation’s agreement to limit its nuclear program. While both supporters and critics alike consider the agreement historic, many argue that the U.S. may not be on the best side of the deal. Here’s our take on what the Iran nuclear deal can teach us from a business perspective.
Robert Gates, former Secretary of Defense for George W. Bush and Barack Obama, made it clear he felt the nuclear agreement left much to be desired from an American position: “We must now face the reality that there are serious consequences to voting down the agreement or pulling out of it,” he said. “I think we swallow hard, acknowledge our negotiators got out-negotiated, and that we have a flawed deal, and make the best of it.”
Let’s hypothetically apply these comments to a business transaction. Does this sound like a deal that you would want to be on the wrong end of? Probably not.
While we are not discounting the argument that a deal of this magnitude and historical significance has its own playbook and set of rules, what transpired in the US-Iran negotiations can be illuminating to those involved in any type of business transaction.
Getting a deal done is easy, but getting the right deal done is a challenge.
Always keep the original strategy in front. Yes, closing a deal is ultimately a transaction and there are mechanical details that need to be handled. But don’t sacrifice the original strategic intent for expediency in getting the deal done.
Don’t “need” the deal. If you are in a negotiation and you give the other party the impression that you must make this deal, you may be at a huge disadvantage at the negotiation table.
An agreement is only as good as the parties signing it. Many commentators have pointed out that the key to the Iranian deal is trusting Iran to stick with the deal. As in business, it’s essential to assess levels of trust throughout a negotiation and factor it into the structure of any deal you hammer out.
Only time will tell if this remarkable deal will stick and bring about the benefits hoped for by all the parties concerned, however these insights are worth remembering before you enter into any buy/sell transaction. Talley and Company has negotiated hundreds of M&A transactions and can help you make the most of a transaction based on your goals and priorities.
Donald Trump wants to make sure you know these two facts: he is a very rich man ($4.1 – $8.7 billion rich depending on who you ask) and that he is the wealthiest presidential candidate for 2016. “I have a total net worth of $8.73B,” he said. “I’m not doing that to brag. I’m doing that to show that’s the kind of thinking our country needs.” But does that mean Trump has enough money to make a legitimate run for President in 2016?
Trump’s wealth matters because rather than rely on rich donors and Super PACs who will ask for future political favors in return, Trump plans to pay for his own campaign run.
Amazingly enough, Trump might not have enough cash to finance a presidential campaign by himself if he plans to compete against the likes of front-runners Hilary Clinton and Jeb Bush.
To put it in perspective, President Obama and his supporters spent $1.1 billion to win in 2012, while Romney spent $1.2B in his losing effort. In both cases, Super PACs and donors were responsible for funding a significant portion of their campaigns.
Fast forward to the 2016 election: Preliminary reports estimate that total spending for the Republican and Democratic nominees’ campaigns could reach $2 billion each.
According to his recently released financial summary, Trump has $302 million (what a paltry amount, right?) in liquid assets. It’s certainly a lot of money, but not enough to run a successful campaign. Most of Trump’s wealth appears to be tired up in real estate, business partnerships and endorsement deals. Those assets, while contributing to his net worth, would do little good unless Trump plans to liquidate or borrow against them.
Yes, even one of the richest men in the world might find himself in the capital market looking for help financing his campaign if he decides to go it alone. And like any type of capital acquisition/growth strategy, it could prove to be a complex venture to undertake.
Regardless if you are planning to run for President or not, Talley & Company knows how critical funding a business’ growth is to entrepreneurs and family-owned businesses. We are here to help connect you to the right lender or equity group to fit your unique growth plan, present your company’s financials and “story” in a manner that increases favorability with lenders or equity groups and structure the transaction in the most tax-efficient manner.
For more information about how Talley & Company can help you plan, negotiate, structure and execute on your growth strategy, contact us today.