Executive Summary

Financial Management

Finance is a mission-critical function for any company. The financial pressures on companies are unabating throughout their life cycle, whether they are in early-stage development, mid-stage growth, turnaround, or late-stage exit. It is critical that any company has a comprehensive and detailed Financial Management System, including financial analysis of current operations, feasibility studies of projected growth plans, cashflow proformas, an understanding of its current and anticipated capital structure, and careful management of the capital raising and M&A process. Companies that lack in-depth financial management systems are more likely to fail than those who have these systems in place, despite having great products. Companies with strong financial management systems have a distinctive competitive advantage over those firms that lack these systems, due to having more efficient operations; a clearer understanding of their sources of profitability; a more efficient capital structure; a better awareness of the financial risks entailed in future growth plans; and greater access to capital.

Dr. Keysser has over 35 years of professional experience as an investment banker and a business financing consultant, including serving as Managing Director for Dain Rauscher and SVP and Principal at Miller & Schroeder Financial. He is a Professor of Finance at Saint Mary’s University, in their MBA program, teaching courses in Corporate Finance, International Finance, Financial Institutions, Investment Banking, Government Finance, and Managerial Accounting. He is also on the adjunct faculty at the University of Minnesota, Carlson School of Management, teaching International Finance.

His personal achievements include raising over $3 billion of capital in over 250 engagements; structuring complex financial analyses and projections for early-stage and mid-stage technology companies; developing complex financial management systems for technology companies; raising debt and equity capital; and advising in M&A transactions. His service skills incorporate (a) financial analysis; (b) feasibility studies and proformas; (c) capital structure review; (d) project management in M&A and investment banking; (e) turnaround management; (f) financial management and capital budgeting; (g) raising capital; and (h) interim CFO services.

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Service Methodology

The essence of a successful Financial Management System for a company, as provided by Dr. Keysser, is having an in-depth understanding of the details of the financial operations of the company. This includes understanding the precise sources of profits and losses at a micro level, the company’s current capital structure of debt and equity, the financial implications of management policies (such as terms of sales, and leasing versus purchasing), the measurable costs and risks of future growth plans, the weighted average costs of all capital raised including the opportunity cost of using retained earnings, and the opportunities for an M&A transaction, buy-side or sell-side. The company may choose to use an Enterprise Resource Planning (ERP) system, in some cases, but much of what is defined as financial management can be accomplished without an expensive ERP system, especially for small capital-constrained companies.

A successful Financial Management System therefore incorporates (a) developing an understanding, at a micro-level, of the sources and causes of the company’s profits and losses (as broken by product, location, marketing campaign, sales distribution, and other metrics); (b) examining the company’s capital structure of debt and equity and calculating the Weighted Average Cost of Capital (WACC) of the company; (c) reviewing all growth strategies and opportunities through feasibility studies and discounted cash flow (DCF) analyses of their future operations and strategies; (d) examining different options for raising the External Funds Needed (EFN) for future growth strategies; (e) reviewing the company’s foreign exchange (FX) practices and policies, including mitigating exposure risks; (f) reviewing, on a continual basis, the opportunities for an M&A transaction; and (g) analyzing the company’s dividend policies.

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Service Options

Companies can elect whether they just require Appleton Greene for advice and support with the Bronze Client Service, for research and performance analysis with the Silver Client Service, for facilitating departmental workshops with the Gold Client Service, or for complete process planning, development, implementation, management and review, with the Platinum Client Service. Ultimately, there is a service to suit every situation and every budget and clients can elect to either upgrade or downgrade from one service to another as and when required, providing complete flexibility in order to ensure that the right level of support is available over a sustainable period of time, enabling the organization to compensate for any prescriptive or emergent changes relating to: Customer Service; E-business; Finance; Globalization; Human Resources; Information Technology; Legal; Management; Marketing; or Production.

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Service Mission

Following a rigorous Financial Management System strategy increases the odds that any company, no matter where it is in its life-cycle, will be successful and prevail in a highly competitive and uncertain industry. It is a very structured approach, yet flexible enough to continually adapt to changes in the company’s competitive, financial and regulatory environment.

Dr. Keysser’s Unique Service Proposition (USP) is to assist his clients in developing a holistic understanding of every aspect of their Financial Management System, and how this System integrates with and coordinates with all other elements of the company – sales and marketing, growth planning and management, operations, human resources. Finance becomes the linchpin on which all other elements ride. Proper financial management, including access to capital, ensures that all other parts of the company, from sales through delivery, have the capital resources to function correctly, and the access to capital needed for expansion. A company with a robust well-managed Financial Management System has the resources needed to prosper; a company without this system will continually struggle to survive.

A good example of this was Dr. Keysser’s work with a bio-pharma company that was at a relatively early stage in its development, with a strong IP portfolio, an array of new pharmaceuticals with very interesting potential, a continual need for additional capital for R&D, a relatively inexperienced financial team, and a C-level team whose strengths lay more in biopharma than in financial management. As their financial consultant and investment banker, Dr. Keysser assisted them in developing a robust financial management system, project their future capital needs, and interact with the investor community, including bringing in two funding offers from major credible funding sources.

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Service Objectives

The following list represents the Key Service Objectives (KSO) for the Appleton Greene Financial Management service.

1. Managerial Accounting
   An important first step for a company to improve, maintain and sustain profitability is to understand, in detail, the sources of the company’s revenues, costs and resulting profits, breaking these down by product line, technology, location, market area, sales campaigns, personnel, supply chains, operational procedures, and other metrics. For example, the company may find that by disaggregating its financial data, what appears to be a profitable enterprise at the macro level will obscure the fact that some elements lose money while other elements are highly profitable. This information, when disaggregated to the micro level, can assist the company in making decisions on products, technologies, market areas, sales methods, marketing campaigns, personnel and locations. Data is key to understanding a company’s financial profile. The Financial Management System develops a data driven and statistically analyzed information base that allows managers to examine in depth the underlying structure of the company’s financial operations. You can’t make more money until you understand how you are making money now. Companies use advanced Managerial Accounting methods to develop this complex understanding. In some cases, it may be appropriate to convert the company’s spreadsheet-based management system into an Enterprise Resource Planning (ERP) system. But with or without an ERP, the company can aggregate and analyze the data needed for this understanding. Once the company understands these underlying dynamics of profits and losses, combined with reviewing its capital structure, the company can make reasoned and data-drive decisions on its various strategies of product selection, technology adoption, sales and marketing campaigns, personnel, and locations.
2. Capital Structure
   All companies have some level of a capital structure, even if it is only the owner’s equity and a bank loan. As company’s financial needs grow and become more complex, their capital needs escalate rapidly, to the point where a company, especially one in a capital-intensive industry such as manufacturing or medical-tech, will be continually seeking additional sources and forms of capital, both for Capital Expenditures (CapEx) and Working Capital. All forms of capital are essentially categorized as forms of debt or forms of equity. Our Financial Management System will help the ownership understand its true cost of capital, by calculating the company’s Weighted Average Cost of Capital (WACC). The WACC is calculated by looking at each form of capital, calculating the effective cost of that specific form of capital, and then aggregating those costs by their weighting in the overall capital structure of the company. It is important to account for the tax impact of capital, since interest on debt is tax-deductible while dividends on equity are not. This tax structure tends to favor debt over equity, yet the consequence of issuing more equity is that ownership is further diluted. Once the company understands its WACC, it can then develop future funding campaigns to result in the most cost efficient capital structure possible, reducing the overall cost to the company. sand as future funding campaigns are planned, implement the most cost-efficient structure for that capital. The other implication of the calculation of WACC is that the WACC then becomes the discount factor used in future capital budgeting analyses, and the discount rate used in the analyzing the Net Present Value (NPV) of proposed budgeting decisions. The lower the WACC, the more feasible a project; the higher the WACC, the less feasible a project.
3. Capital Budgeting
   As companies continue to grow, especially for companies in capital-intensive technological industries, it is important to develop an on-going and rigorous capital budgeting system, both for the constituent elements within the company by unit or division, and for the overall aggregated company. This is not just a one-time end-of-year effort, but a continual effort throughout the year, identifying growth opportunities and replacement needs, determining the incremental revenues and costs associated with those opportunities, and matching them against the available capital, either current retained earnings or funding potentially available from the market. The process begins with a review of all growth opportunities available to the company, and all requests for funding from the individual units or divisions. Then the incremental impact of each specific project – whether a new R&D campaign, changes in products, new locations, new or replacement equipment, added personnel – is calculated, both on the revenue and cost side. This incremental impact is then projected into the future through a cashflow proforma, making various assumptions of inflation, market size, sales efforts, competitive risks, Costs of Goods (COGs), and pricing. These future incremental net gains are then subjected to a Discounted Cash Flow (DCF) analysis, where each year’s net gains are reduced to the current time through present value. Here, the WACC discussed above becomes important, since the WACC is the discount rate, in most cases, at which the future cashflow is discounted back to the present. Once the sum of present values is computed, the upfront costs of the new opportunity are subtracted, which results in a Net Present Value (NPV) analysis. If the NPV is positive, then the project is viable, at least by financial standards. If the NPV is negligible or negative, then the project is most likely not viable, again by financial standards. The NPV method can also be used to compare multiple alternative projects available to the company, allowing it to rank-order various opportunities.
4. M&A
   Companies typically seek continuous growth, and one avenue for growth is to acquire other companies, in either a horizontal or vertical diversification strategy. Acquisitions can be tremendous engines for growth, or disasters that can severely damage a company (think of Daimler acquiring Chrysler). Acquisitions can help a company to absorb competitors, expand its technology and IP portfolio, gain market share, consolidate a fragmented market, gain market share through new territories, and acquire additional assets of plant and equipment. Using its Financial Management System, a company can engage in buy-side transactions. Dr. Keysser can assist the company in identifying its needs for growth, and opportunities for potential acquisition. Then a feasibility study of this acquisition can be conducted, using different assumptions of valuation, incremental costs and revenues, and acquisition costs. Then the company, through its consultant, can develop a Discounted Cash Flow (DCF) proforma to project future net gains, present-valued back to the present at the company’s Weighted Average Cost of Capital (WACC), as discussed above. Part of this analysis is to analyze how the company will fund this acquisition – through a combination of retained earnings, outside debt and outside equity. The costs of this acquisition capital becomes part of the analysis in determining the Net Present Value (NPV) of the proposed transaction to the company. The company needs to obtain any outside funding needed to conclude the acquisition, and the close the transaction. In all of these steps, the company’s consultant can play a pivotal role. In a sell-side strategy, if a company wants to divest a unit or subsidiary that no longer meets the long-term corporate needs of the company, or exit entirely, Dr. Keysser can assist the company in valuing that candidate for sale, identify likely buyers, assemble a disclosure package, approach likely buyers, and assist in closing the transaction.
5. Raising Capital
   Companies continually need additional capital for maintenance of current operations, and for growth and acquisitions. This is a combination of Capital Expenditures (CapEx) and Working Capital. This capital can come in the form of using retained earnings (which is in part is a function of the company’s dividend policy), external debt of various sources, and external equity. Debt can come in the form of bank or non-bank senior secured debt, subordinated unsecured debt, Accounts/Receivable (A/R) financing, Purchase Order (PO) financing, leasing, sale-leasebacks, and various government grant and loan programs (such as the Export/Import Bank). Equity can come in the form of owners’ contributions, private angel equity, institutional equity, public equity versus private equity, and common stock versus preferred stock. Raising capital is a complex and multi-layered process. It begins with a clear vision of the company’s directions and growth opportunities, its capital budgeting process (see above), and its analysis of the capital needs for growth and acquisition. Using the Weighted Average Cost of Capital (WACC) calculated earlier (see above), the company can then determine its optimum and most cost-efficient form of capital structure, typically a blend of various debt sources and equity methods. Dr. Keysser can assist the company in developing a strategy of acquiring the most cost-effective forms of capital, through its Financial Management System, and in conducting capital funding campaigns. This process begins, as discussed above, with the analysis of current operations and financial management, growth strategies, a capital budgeting process, a Net Present Value (NPV) analysis of potential opportunities and competing opportunities within the company, a calculation of the company’s Weighted Average Cost of Capital (WACC), acquisition opportunities, and then the optimum capital structure for the company.

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Testimonials

Flambeau Plastics

“Dr. Keysser was instrumental in assisting us to develop a growth strategy for our rapidly expanding plastic case market. We were very successful at the time in other areas of plastics manufacturing, but this was a new venture for us, to reflect a shift in the overall market demand for plastic products. He helped us to identify and analyze an opportunity for a new out-state manufacturing facility to accomplish this growth, including developing a feasibility study and a financial analysis of the potential growth from this opportunity. He helped us to review our existing financial and capital structure, and recommended an approach for raising the needed capital. He then generated the external funding needed, through raising $10M of senior debt, to successfully implement this strategy.”

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Albertson’s Foods

“Dr. Keysser brought an idea to us of refinancing some of our existing stores to take advantage of reduced interest rates, and a very strong demand in the market for our proposed type of debt. At the time, there were advantages within the tax code that made those financing methods feasible, but those provisions were scheduled to be reduced in the near future. He assisted us in analyzing the net impact on our bottom line of undertaking these refinancings. He was a key figure in this strategy, recommending options for lowering our costs of capital and our operating costs, and reminding us of the time-urgency of concluding these refinancings before the announced change in tax law. He then conducted the refinancings of seven of our stores in four different states, which contributed significantly to our cost savings.”

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Bio-Thera

“Dr. Keysser served as our financial advisor and investment banker, and assisted us in developing very detailed and comprehensive financial models and proformas of our drug development and FDA testing processes, including 3 different phases of trials in four different countries, simultaneously. He also was very helpful in developing a strong Financial Management System for us. At the time, we were a relatively early-stage biopharma company with a strong IP portfolio, almost no revenues, a lengthy development cycle, and relatively little experience in financial management. We were able to use the models he developed, and the disclosure package assembled by Don and his team, to obtain funding proposals from two Silicon Valley-based venture capital firms.”

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Enova Illumination

“Dr. Keysser has been a major participant in our planning process, developing our funding strategy, our cashflow proformas, and a disclosure package for going out to investors. He played a significant role in developing our Financial Management System, at a time when we did not have a CFO and only had a part-time Controller. He also helped us to negotiate a Joint Development and Cross Licensing Agreement with an off-shore medical technology company, in which we invested our own equity capital, and he is now helping us to negotiate a Distribution Agreement with a large medical equipment distributor.”

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Summit Machine

“We have gone through two turnaround efforts with Dr. Keysser, as our sales and out financial performance has gone up and down. Throughout those turnaround campaigns, he helped us to understand our underlying financial performance, our needs for growth capital, and opportunities for growing through acquisitions. He helped us to refinance our existing debt twice. He was also instrumental in assisting us to convert from a spreadsheet-based management system to the Made 2 Manage ERP system, as part of our continuing to refine our Financial Management System. He reviewed several different diversification strategies for us, including entering two markets that would have been new to us, but would have been a logical extension of our existing strengths and expertise.”

More detailed achievements, references and testimonials are confidentially available to clients upon request.

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Industries

This service is primarily available to the following industry sectors:

Financial Services

These are times of unprecedented change for Banking & Financial Services organizations around the world. Never before have we seen such disruption in the industry, from soaring customer demands and new competition, the development of new financial technology (FinTech) models, geographically diverging regulations, shifts in political/economic systems, and a global battle for talent. In every corner of the world, financial institutions are engaged in a race to overcome these headwinds by leveraging the explosion of emerging technologies to drive digital transformation across their enterprises. But combining multiple technologies without creating a disjointed customer experience, while juggling a lack of skilled resources and the omnipresent specter of data security is far from easy, particularly when trying to grow top line income and manage cost reductions.

Capital remains very available globally; estimations of excess capital, or ‘dry powder’ as the industry often calls it, are in the trillons of dollars. Much of that capital is in Asia and the Middle East, not just in the western nations. But non-western capital is continually looking for safety, making western opportunities especially attractive to them.

Creating a strong Financial Management System can help companies optimize their business model to take advantage of technologies including cloud, software-defined networks, intelligent automation and Blockchain. Dr. Keysser can assist his clients by providing unparalleled industry insight to conduct analyses of financial mechanisms through our Financial Management System. These assessments provide the information needed to design next generation operating models and implement best in class processes to drive lasting competitive advantage for our clients. This includes developing a robust capital budgeting and feasibility study process, a strong and cost-efficient capital structure and identifying optimum growth strategies.

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Consultancy Services

To stay competitive in a globalized ecosystem of enterprises, it is very helpful and often essential to draw on the expertise of outsourced advisors, who can help your business scale its operations, reduce overhead, increase profit margins, and become more productive and efficient. These advantages can result from integrating and streamlining workflows and strategic projects in novel ways, and by implementing new solutions to solve common – and uncommon – business “pain points.” Dr. Keysser, as your consultant, can help your business realize its full potential by offering key insights and critical intelligence that can help a business of any size and in any location scale its growth and reach and fulfill all its strategic, long-term goals, using a strong, robust and sustainable Financial Management System that he will help you develop.

Outside consultants can play a critical role, and a cost-effective role, for a company wresting with growth and financial management issues. First, consultants can be brought in on a limited basis, as-needed, to address specific problems. In many cases, companies do not have the in-house capacity to deal with those issues, nor should they need to, since the in-house team will cost considerably more (salary and benefits) and are much less flexible in their contracts. Consultants can bring in a level of expertise not currently within the company, with a fresh outside perspective, at a reduced cost, and for a shorter defined term of operations. If managed well, outside consultants can integrate into the existing management team at a company, as a resource and not a threat to existing managers.

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Energy Management