Blah blah blah.... by that argument it wouldn't matter if...

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brydos

494 Posts.

129

24/01/20

12:21

Post #: 42556085
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Originally posted by HK1: ↑

No anger or indignation, but you don't understand basic business management. You seem to be under the assumption that Debtors and Stock will reduce when OBJ make the acquisition of NS. Simply put, as OBJ collects the money from the Debtors, new amounts are going into the Debtors. Same with Stock. It is normal business practice to by the Debtors and Stock as if you didn't, you would have a cash flow issue from the start. And when you are paying $85m for a business, you expect to buy assets, which in the case of NS are the $12m property and $23m in Debtors and Stock.- so that is $35m. What is possibly more important is the amount for the intangible assets (goodwill) that OBJ is paying for.

As @hiroic has suggested, it is a NS cash flow issue and there is potentially nothing to "grab" and in normal business practice will have no real value unless there are changes to the NS business model. It could actually work the opposite way - if Debtors or Stock blows out, cash will be squeezed and it will bad for cash flow. As OBJ gets bigger, more resources are required to manage the financial side.

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Blah blah blah.... by that argument it wouldn't matter if debtors was $0m or $100m and same with Inventory. The fact is the acquisition price of $85m less $12m (external property) less $15m (conditional on performance) of $58m (excluding time) assumes some debtors and inventory (and I'm sure a make good versus cash is baked into the sale). This means the Working Capital needs of the business should be self-sustaining... or positive from OBJ's perspective. This is key to the deal. Is it a good deal? time will tell... it's not terrible. Let's hope that Danny deserves the $15m extra equity in 3 years

And as a bonus the warehouse rental will help pay the debt obligations.

OBJ Price at posting: 1.5¢ Sentiment: Hold Disclosure: Held
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