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California Business, Insurance And Environmental Law Blog

How to preserve culture as a company grows

Companies in California and throughout the country may tout their culture as one of their strengths. Corporate executives and others may also point to a company's culture as a reason for why it hasn't performed well. Even if an organization has a strong set of core values, those values could be tested during a merger or acquisition. Ideally, the CEO will step up and establish what he or she wants the business to be known for.

Generally speaking, it is easier for a message to resonate when it comes from a leader as opposed to someone in HR. As the business grows, the CEO will need to find and develop a leadership team that can help to spread that message throughout the company. That team should spend time talking to employees about those values and showing examples of those values in how the business operates each day.

How to acquire a start-up with success

Depending on your industry, you may have the opportunity to acquire start-ups in your space. If this is something you're strongly considering, it's critical to understand the steps you can take to protect your organization, all while negotiating the best possible deal.

Once you pinpoint a start-up that you're interested in acquiring, it's time to reach out to gauge their interest. You'll typically find that these companies are in one of three positions:

  • They're actively seeking an acquisition
  • They're staying the course with the idea of going public in the future
  • They're in a growth phase and have no intentions of "selling out" at the present time

Lenders and business plans

Many entrepreneurs need some type of financial assistance when starting a company. While it is sometimes possible to raise funds for investors, many startup owners will initially rely on a bank loan to fund the initial costs of doing business.

Applying for a business loan is an important step for a startup company, often because the loan application process is often the beginning of a relationship a banking institution. By establishing a strong loan repayment history, a company may find it much easier to make use of other financial products, such as lines of credit and mortgage loans.

Companies expand their customer base with acquisitions

Many business owners in California are looking for ways to grow their companies or expand their reach to new markets. Acquisitions are some of the most important ways for companies to expand as they can acquire entirely new sets of customers or markets from those who have already built a reputation or experience in a particular area. Some of the most successful large companies were built by acquiring and integrating smaller firms to make a new, comprehensive whole.

One large content management and marketing company, Mediafly, is adopting a related approach to growth. Mediafly made its name by developing strategies and business-to-business sales for corporate giants like PepsiCo and NBC Universal. Long known as an enterprise company, Mediafly's services are known by many for their quality and reliability. Still, they have also been widely perceived as out of reach or excessive for small or medium-sized businesses. However, the company recognized a growth opportunity in working with smaller companies. In order to expand its reach to more moderately sized companies, Mediafly acquired another firm, iPresent LLC. iPresent had built its business on servicing smaller companies in business-to-business sales and online marketing, making it a logical expansion for Mediafly.

Broadcasting giant acquires regional sports channels

Sports fans in California and across the country are often particularly fond of their local teams. This is one reason why Fox Sports has run 21 regional networks across the country. Now, Sinclair Broadcast Group has completed the acquisition of the stations from the Walt Disney Co. The purchase of the regional sports channels marks the single largest acquisition in the history of Sinclair, the massive broadcasting company. The company is the largest single owner and operator of local TV stations across the country under a variety of banners. The purchase was announced in May 2019 but was closed in August after the Department of Justice granted its approval to the transaction.

The purchase price for the 21 stations was $9.6 billion. With the acquisition, Sinclair goes from being a major name in news and other regional channels to becoming a major player in the sports field. The management team for Fox Sports' regional networks also moved over to Sinclair with the acquisition of the channels. The stations were sold by Disney shortly after the company purchased 21st Century Fox for $71 billion in March 2019 when the Justice Department required the entertainment giant to sell off the networks.

Government tries to block $360 million merger

California residents may have heard about a proposed merger between Sabre Corporation and Farelogix, Inc. The proposed deal would be worth $360 million, but the Department of Justice has moved to block the transaction. It claims that Sabre Corporation is attempting to buy out a rival that is attempting to disrupt the travel technology space. If the deal were allowed to go through, it could hamper competition in that industry to the detriment of customers and airlines alike.

Sabre currently processes more than half of all airline bookings in the United States that are conducted through travel agencies. The president and CEO of Sabre says that the company has done everything it can to mitigate any concerns that the government might have. Furthermore, Sabre says that it will show in court that the deal is good for competition.

Mistakes that could result in a failed business

There is no guarantee that a company formed in California or any other state will succeed. However, there are steps that a business owner can take to improve his or her chances of creating a successful company. For example, a company should have a financial plan, a business plan and a marketing plan in place before starting operations. Ideally, an organization will have tangible goals and the ability to measure its progress in meeting them.

A company will always need to know its numbers whether it was founded yesterday or a century ago. At a minimum, a business will need to have a profit and loss statement, an income statement and records of all transactions. Those who want to start their own company should know the difference between profit and cash flow. Creating a balance between the two is important in allowing a startup to grow and thrive.

Sources of new business financing

One of the biggest challenges faced by California entrepreneurs is securing the capital they need to fund a new business venture. Traditional banks adhere to strict underwriting standards and will generally want to see an established track record before they lend money, which means that many entrepreneurs turn to friends, family members and alternative lenders for the cash they need.

Borrowing from friends or loved ones is perilous because business is unpredictable and failing to pay back this type of business loan in a timely manner can strain or even wreck relationships. Online crowdsourcing websites like Kickstarter have become a popular place for entrepreneurs to find backers in recent years, but they are extremely popular and attracting attention can be difficult if ideas are not novel or interesting. Loans guaranteed by the Small Business Administration are another source of seed capital, but qualifying can be difficult for people who cannot put up any collateral or have had credit problems in the past.

Rent-A-Center completes the acquisition of Merchants Preferred

Rent-to-own showrooms packed with furniture, electronics and appliances are a common sight in California and around the country, and a great many of them are operated by Rent-A-Center Inc. The Texas-based retailer has 2,972 locations in the United States, Mexico and Puerto Rico, but it has struggled to establish a similarly dominating presence in the growing virtual rent-to-own sector. Any qualms stockholders may have had were put to rest in July when Rent-A-Center announced that it had entered into an agreement to acquire Merchants Preferred, and recent media reports reveal that the deal has now been completed.

Merchants Preferred is a leader in the $20 billion and growing virtual rent-to-own segment, and Rent-A-Center's CEO says its acquisition will provide the company with proven technology, a centralized team of support staff and scalable infrastructure. The current president and CEO of Merchant Preferred will be joining Rent-A-Center to take charge of its virtual operations according to media reports.

Gannett and New Media announce $1.38 billion newspaper merger

California investors who follow the media and communications sectors may be aware that two of the nation's most prominent newspaper publishers have announced merger plans. New York-based New Media Investment Group and Virginia-based Gannett made their plans public in an Aug. 5 press release. The deal is reported to be worth in the region of $1.38 billion.

According to the press release, the merger will allow the companies to lower their overheads by between $275 and $300 million by eliminating overlapping costs. The emerging leaner company will also be better able to transition away from traditional print news toward digital information distribution. New Media shareholders will own 50.5% of the new company with the remaining 49.5% being distributed among Gannett stockholders. The company will operate out of the current Gannett building in McLean and conduct business under the Gannett name.

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