In short the forecast would need to be revised by the recommended changes Singh would apply to the new financial policy. However, recent times have struck Deluxe with financial structure problems associated with obtaining the most optimal capital structure.
Another inherent risk of this single focused strategy is the loss of business diversification options.
The cash on hand that Deluxe does generate will have to go to maintaining the operating capital to finance daily operations. What financing requirements are foreseen for Deluxe in the coming years?
Meanwhile, the emergence of new technology, e. However the check printing portion of the payments industry is mature. The debt taken by the firm should be used to purchase a small electronic checking firm that specializes in software development for integrating checking clients into stored databases for payroll and checking services.
This being said the recent drop in check demand as well as the current repositioning of the company on its core business have highlighted some possible issues in current financial structure: The chosen strategy to reposition "the company as a pure -play-check printing company" is debatable but risky.
Consider the concepts of debt capacity and financial flexibility. With a relative market share of almost 2, Deluxe is dominating the scene!
The solution is based on the following objectives: Singh do not decide on time about the capital structure, then it is going to be even more challenging as there is a chance the cost of capital will rise. The stock repurchase program initiative proposed by Singh will cause the stock to appreciate do to the decrease in shares outstanding.
Mix of debt and equity. Download this Essay in word format. Also the time line of the line of credit might also exhaust by August Explore the practical challenges involved in determining the optimal mix of debt and equity. Additionally, the company failure to capitalize on the benefits of the use in debt financing created a higher cost of financing.
By selling iDLX, Deluxe lost a chance to enter a new business than the payment business they were in for years. Secondly, the firm does not maintain or manage flexibility in financing well. They did this by closing around 50 plants, reducing its labor force by half and divesting 20 non-core businesses.
In other words he abandoned company plans to position itself in the promising adjacent electronic payment business.
Currently, Deluxe has the largest market share available and is set to benefit the most by transitioning to electronic checks.Through all this analysis, it seems that Deluxe is able to reach its objectives in particular, financial flexibility, bond rating and value creation.
Therefore, we recommend that, the company to recapitalize its equity by increasing, capital through the release of new shares, or try to increase the face value of the shares.
Deluxe partners with small businesses and financial institutions to accelerate growth. Learn more about Deluxe marketing services and checks here.
Deluxe Corporation is a leader in the check printing industry. However, recent times have struck Deluxe with financial structure problems associated with obtaining the most optimal capital structure. The cost of the Deluxe Corporation Financial Flexibility case study solution package (Excel and Word files) is $39, and can be immediately downloaded after the purchase is made via the PayPal payment link below.
In Julyan investment banker advising Deluxe Corporation must prepare recommendations to the company's board of directors regarding the firm's financial policy. Special considerations are the mix of debt and equity and the maintenance of financial flexibility.
Deluxe Corporation. No description by on 18 November • Earlier Deluxe retired all of their long term debt the company had not issue bonds in the last 10 years.
• The company had been doing a lot of share repurchases, and the stock was the highest level in 10 years. Flexibility.Download