Febė — accounting services

• Business reorganization
• Purchase and merge of companies
• Transfer of business
• Business sales
• Bankruptcy

Business reorganization

We prepare projects for company reorganization, provide consultations on the issues of the course of reorganization and help to organize the overall process of reorganization through the integration of legal and financial aspects pursuant to the laws and other legal acts of the Republic of Lithuania.

On shareholders’ request, we act as objective representatives in the boards of shareholders and General Meetings when solving different issues and problems.

Purchase and merge

Purchase and merge of companies is one possible way of such protection, when the purchase or merger of a company is realized through the acquisition of certain control in another or common company and the obtaining of use via synergy effect, economies of scale, reduction of costs, etc. Although transfer of business to the family members still dominates in Europe, the scope of transferring business to the third parties is increasing. Thus, it is very important to understand a buyer’s and seller’s needs and to help them meet one another. The main reasons encouraging businessmen to take part in business transfer transactions is making profit and sometimes the only possibility to realize the strategic aims of a company. Not only natural persons, but also large companies, as well as small and medium companies take part in such transactions. The sellers of a business are mostly motivated to sell their business as this is the only way to change the type of activity and to regain their funds invested into the business. Meanwhile, businessmen who purchase other companies see a real use from a possible synergy effect, i.e. from a possibility to perform more efficiently working together than each company working separately. A gross effect manifests through the horizontal integration of the companies – merger of competing companies, or the vertical integration – merger between a company and its main suppliers or a company and its main customers. Such transactions enable the companies not only to achieve rapid growth and economies of scale, but also to save a significant part of costs, to share management skills and the advantages each company has in the market. At the same time, company sales-purchase transactions reduce competition within the market, as merger of companies helps reduce the number of participants in a market. Thus, transfer of business transactions have both, positive and negative features; which ones shall prevail largely depends on the companies taking decision to participate in such transactions.

Transfer of business

Transfer of business is a process of sales / purchase of business, whereat one business joins with or purchases another business. At the moment the number of such transactions is increasing in the private sector, i.e. operating companies are bought by their competitors, partners, foreign strategic and financial investors. More and more businesses are developed with the aim to sell them successfully later on and to gain the desired change of investments. Usually the purchase and joining of companies become more frequent when there are positive predictions for the development of economics or certain economic branches. One of the driving forces of such transactions is belief that the future is going to be better. Another important factor encouraging purchase and joining of companies is the expansion of financial market. The offer and costs of financial instruments also make a significant impact on the transactions of this type. Certainly, it is difficult to purchase a business on one’s own resources, but it is even more difficult, when the price of the borrowed capital is very high and various creditor’s restrictions and limitations are significant. After Lithuania became a member of the European Union (EU) and its market merged with the markets of other EU members markets, competition is slowly becoming international; thus, Lithuanian business has to compete not only with economic subjects operating in the local (Lithuanian) market,  but also with other foreign competitors offering the same type of goods or services. More and more foreign companies choose to invest in Lithuanian market as a share of a big existing EU market. Meanwhile, it is quicker to enter a market by purchasing players already operating in it that by starting a new business right from the start. For Lithuanian businessmen it means a more tough competition and a need to defend against it.

Business sales

Business sales can be due to many reasons, both economical and personal, but the following reasons can be listed among the main ones:  

• change of type of activity;
• withdrawal from business activity;
• regaining investment;
• harsh competition in the market.

A business or a part of a business is sold by shareholders planning to change the type of activity or to focus on strategic centers of activity; also a business may be sold if the existing non-strategic companies do not make enough profit or do not help to return the invested funds.

A business may be also sold, if a sole owner does not have a successor, who could take over and develop a business, or if the owners of a business want to leave the business by realizing the accumulated capital. Regaining the invested funds is usually a reason for selling a business, when a company was developed in order to earn from capital increment.

Especially small companies cannot anchor in the market due to growing competition, and they cannot ensure proper financing after they exhaust the available financial resources. In such a case, the only way out is sales of a business and regaining of already made investments.

Both natural and legal persons willing to buy a business can be buyers of a business. Potential business buyers can be divided into two large groups:

Strategic investors – they purchase business, because they are interested in:

• expansion of their own business in new markets;
• taking over their competitors and to strengthen their position in this manner; 
• toobtain a synergy effect through the merger of businesses.

Financial investors- they seek to optimize the value of shares and to increase the returns on investments in the future.

Constantly increasing competition, disappearing limits between different markets and rapidly growing costs usually demand huge supplementary investments; thus, more and more often the owners of the companies prefer selling the whole business or a certain part thereof to a strong strategic or financial investor to accepting significant additional risks by themselves. We become partners from the beginning of purchase process and work together until conclusion of transaction.

Bankruptcy positive and negative aspects

Each business is exposed to a smaller or bigger risk in the market economy. Not a single company can be sure that its goods or services will be on demand in the market. Thus, the managers of the company have to evaluate a risk and the reasons causing bankruptcy. During the analysis of possible causes of bankruptcy it was determined that the overall condition of a company is influenced by general economic factors determining changes in demand for supplied services. During the analysis of internal factors causing the bankruptcy of a company it was determined that the management of a company usually applies inadequate business philosophy and strategy. It is a prerogative of a manager to eliminate internal factors causing bankruptcy; also, inefficient management is one of the factors causing bankruptcy. Inevitable daily mistakes and failure to forecast future leads many companies to bankruptcy. In Lithuania when trying to determine the possibilities of a company’s bankruptcy, only one factor is taken into account – that the value of assets is by half less than overdue liabilities. In this case both, the creditors and the borrowers, incur losses. If potential bankruptcy is evaluated in time and adequate measures are taken, this process can be avoided. Bankruptcy of companies is not such a rare phenomenon in market economy; thus, several decades have been devoted for finding ways how to determine that a company is on the verge of bankruptcy. 

Bankruptcy is evaluated differently among economists and the general public: usually non-economists view bankruptcy as a huge failure and unambiguous vice; meanwhile, people who studied economy value bankruptcy as an example of efficient economy and distribution of resources — a company has not created a sufficient surplus value to the public, so its activity has to be terminated in order to enable other companies to make use of its resources (employees, capital, assets), as they may be able to be more useful to the society. Due to this reason few economists working in a free market would be able to agree with the subsidizing of inefficient branch of economy or with the support of a desperate company. 

We prepare various projects for renewal of an activity and provide administrative services (reference/link – project management); these projects help to evaluate the situation in a company through singling out financial and business risk factors, the identification of which helps to avoid undesirable consequences or reduce negative effects in the future.  

“To know how to take risks is a wonderful art. However, the majority of people do not ever master this art. They are afraid of “unfastening their safety belts” and “stepping into the uncertainty”. And the truth is as follows: the further you go along a branch towards its end, the more you risk falling down, but the juiciest fruits grow at the end of a branch. Thus, managers do not omit their chances if they are guided by their vision. They are always trying out novelties. That is their habit.”

(Robin Sharma)