Complete set of notes on Christopher Stoakes' All You Need To Know About The City, with additional notes on the steps of an M&A transaction. Invaluable information for any interviews/assessment centres/ general goal of improving one's commercial awareness. Notes helped me secure a Vacation Scheme +...
Christopher Stoakes, ‘All You Need To Know About The City’
Chapter 1: City as a Market:
- Types of money:
o Loan: the advance of money. Paying for money using money [interest]
The cost of a loan is the interest you pay on it
Principal: the initial amount of £ borrowed.
o Equity [only available to companies]
Shares companies’ issue.
Investors become shareholders
Look for 2 things:
Increase in the value of company [their share being traded for a lot]
Dividends
- Staying in business is all about cash flow [more important than profit]
o Businesses are encouraged to borrow as they can deduct the cost of borrowing from their profits
Reducing tax
o Economies of scale expand to decrease costs of production
- Buying and selling of shares occurs on a stock market
- Insurance as the mutualisation of risk [why building societies are called building societies]
o When you deposit or borrow money, you are a member of it and therefore an owner
Chapter 2: Equity: The Lifecycle of a Company:
- Types of funding:
o Fixed capital: fixed assets
o Working capital
Without working capital, businesses have a cash flow crisis.
- Where do you get the finance?
o Not loans
o Equity finance – provided by investors
Amateur investors: Friends, Family, Fools.
Professional equity investors: venture capitalists [VCs]
They often seek to own more than half of a business [not to control it, but to ensure that their
return is adequate]
VCs make their money from spotting start-ups that are likely to be successful. They then need
to sell their investment to get profit to invest in other start-ups exit routes.
- Exit Routes:
1. Recycling selling their stake to another VC provider [NB: there are different types of VCs]
o Seed-corn/start-up funders [those that invest in the beginning]
o Late-stage equity funding
2. MBO [Management buyout]
o Circumstances:
Founders buying back from VC
Subsidiary buying from parent
3. Trade sale VC encouraging businesses to sell to a bigger one to increase profit
4. Listing [Initial Public Offering [IPO]]
o Listing on stock exchange
Some don’t want to due to restrictions [e.g., informing shareholders plus the pressure from
shareholders on how to run the business]
- What is the London Stock Exchange [LSE]?
o A Company!
Charges companies to list
Charges investors for buying and selling
Sells information generated from buying and selling data
- Running the LSE:
o Significant concern= getting people to want to list.
Not listing any old companies [especially those that are going to go bust]
There needs to be an element of trust
However, the LSE cannot promise that all companies will do well [they can’t know this]
Just need to ensure that investors have the best information required and remain up to date
with the companies’ actions
o Requiring listed companies to communicate
o Some companies viewing listing as a right of passage- evidence of a company growing up
o Level playing field for investors:
Insider trading:
Investors buying shares on information that isn’t readily available [illegal]
Don’t want a group of investors to manipulate the market
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