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Looking beyond the short term: funding the future

Finance teams have a pivotal role to play as businesses deal with the impact of COVID-19 and consider what to do next. Businesses have to find flexible and agile financing solutions that are consistent with longer term strategic objectives and can accommodate this uncertain environment.

The public equity and debt markets are likely to form part of this solution for many businesses. For businesses looking to fund for the future, modelling realistic scenarios, which form the basis for a sustainable funding platform, inform stakeholder disclosures and facilitate raising critical capital, has never been so important.

How should businesses respond to the downturn?

Right now, stressed businesses need to buy time. Understandably, the focus is about protecting jobs and keeping the lights on until there’s clarity from governments as to how they will get the pandemic under control and, critically, how they will unwind the lockdown. 

Once the immediate crisis has been addressed, and there becomes a clearer path through the pandemic, companies will need to consider their future strategy and funding.

Looking beyond the short term

Once secure, companies will need to shift their focus to longer-term strategic planning and funding, particularly if the short term measures have distorted your capital structure, require debt repayment or companies wish to unwind government support.

It is too soon to assess if, and to what extent, the changes companies are currently experiencing in consumer markets and supply chains will endure. But it is increasingly clear that there will need to be a fundamental strategic shift for many businesses; into which, companies will need to factor their ability to access longer-term funding.

As we move through the next few months of uncertainty, and further evolution of the pandemic, boards will need to increase their focus on the strategic use of capital markets. For many, this will be fundamental to future success, and getting it wrong could jeopardise the viability of the business’ future. It should however be seen as an opportunity to reset and reinvigorate the business and its position (financially and with investors) post COVID-19.

What questions should be considered for accessing the equity and debt markets?

Public equity and debt markets will play a vital role in supporting businesses through and after COVID-19. 

Any approach to the market will need to be underpinned with disclosures and robust financial models. We believe the desire for fuller and more detailed disclosures regarding the impact of COVID-19 will only grow.

For now, ask yourself:

  1. What is your plan for accessing equity or debt markets? Can you execute an accelerated fundraise with a subset of key investors, such as a cashbox placing? 
  2. What does a sustainable funding structure look like to support the business? Do you need to initiate a larger scale equity raise to get your funding structure and leverage correct for a new world?
  3. Do you have financial forecasting tools and processes that put you in the position to make strategic decisions and assess risk? Do you have a model that can be dynamically adjusted to consider various COVID-19 scenarios?
  4. Does your team have the skills, capacity and flexibility to execute an equity or debt fundraise whilst delivering business-as-usual activities or does it need to be supplemented?
  5. Are you thinking ahead in terms of your post-COVID 19 narrative and the robust underpinnings that will need to sit behind this? 

For more information, please visit our web page, or reach out to Mark Hughes (contact details below).

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Mark Hughes

Mark Hughes

Partner, UK Capital Markets Leader, PwC United Kingdom

Tel: +44 (0)7736 599759

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