John Barrett

Tuesday, 01 November 2005 02:57

Bank on service

A financial executive with a large global manufacturing firm recently met with his bank's relationship manager and foreign exchange representative to discuss a foreign subsidiary's large cash position in a foreign currency. The executive was increasingly concerned about the potential financial impact of a significant shift in exchange rates, given the likely prospect that some of the cash might be needed to fund a U.S. expansion in the next 18 months. The foreign exchange representative came to the meeting armed with more than current market rates. He brought detailed information prepared by the bank's foreign exchange strategist that outlined expected trends in exchange rates for the major currency exposures this executive managed.

This data served as the basis for a discussion about various hedging strategies and the accounting implications of these strategies. The financial executive used this information to make an informed decision about a hedging strategy.

He now receives weekly updates on foreign-exchange markets and talks frequently with his bank's foreign exchange representative about market developments.

This story is one example of a banking relationship that provides value well beyond the traditional parameters of banking services. Many financial executives look to their bankers to provide a particular product or service.

But they often overlook the opportunity to consider the same banker as a resource for a wide range of information about subjects as varied as international markets, developments in debt and capital markets, economic forecasts, and foreign-exchange and interest-rate risk management techniques.

Commercial bankers also can serve as a valuable resource by introducing a wide range of contacts in the market. Bankers meet frequently with financial executives from other companies as well as attorneys, accountants, investment bankers and other service-sector professionals.

Clients who take the initiative and ask their bankers about other professionals may be rewarded with a valuable list of connections to businesspeople that can also provide information and advise accordingly.

Recently, the owner of a distribution company spoke with her banker about finding a potential buyer for her business. The banker suggested that the business owner contact two local boutique investment banking firms that specialize in sell-side engagements as well as a local attorney with clients interested in acquisition opportunities.

The banker also introduced the bank's ESOP specialist, who provided detailed information on the benefits of an ESOP sale. The business owner came away from these meetings with information about the value of her business in the market and options for the potential sale of the business. At the end of the day, executives who ask questions and request help from their bankers will benefit from untapped expertise.

Here are a few tips to consider when working with a bank.

  • Look for an experienced banker who will bring financial ideas and solutions to the table. Share your business objectives and strategies with your banker and work together to improve your business.

  • Take the time to learn about your bank's capabilities. If your business is large enough to support a relationship with several banks, find a group of banks that have core competencies in the areas most critical to the success of your company.

  • Get to know the product specialists at your banks. These specialists often are the gateway to new ideas and information.

  • Do not be afraid to ask for information on a variety of issues. Banks often are an untapped resource when it comes to information that can help you manage your business.

  • Bankers are trained to identify and manage risk. Discuss with your banker the significant risk factors that affect your business and the tools or actions available to manage these risks.

  • Banks may also be a great intermediary to other service providers or businesses experiencing the same challenges and issues facing your company.
John D. Barrett is a senior vice president and manager of the commercial banking division of LaSalle Bank in Cleveland. He is responsible for portfolio management and new business development. Reach LaSalle Bank Cleveland at (216) 802-2200.

Tuesday, 31 August 2004 06:05

It's all who you know

It wasn't long ago that the idea of doing business overseas, especially in a place as distant as Asia, wasn't an option for most mid-sized businesses.

The logistics of such an enterprise were overwhelming, and the opportunities didn't outweigh the costs and risks. But much of that has changed. Today, a foreign market presence is a realistic option for many mid-sized businesses looking to grow and increase market share.

The most important thing after deciding to extend operations overseas is to decide who to enlist as a local partner to assist in this effort; many businesses have a difficult time starting a new manufacturing plant in the United States, much less across the ocean.

To create partnerships overseas, you must have established contacts that have direct links into those specific international markets in which you're interested.

Although the markets in Asia are continuously improving and becoming more sophisticated, maneuvering within those countries' strict, bureaucratically controlled financial, legal and business markets can be a major challenge. Simple operations such as setting up a U.S. dollar or local currency bank account can require pages of forms to be completed. One must depend on a local expert who is familiar with such processes to guide you through the system.

New players in foreign markets require a network of local introductions and recommendations in order to even begin discussions with overseas partners. These qualified local advisers who are familiar with local customs, laws, language and currency, will get your business a lot further, a lot faster.

After China's entry into the World Trade Organization, modifications, revisions and alterations were made to 2,300 of its foreign trade laws and regulations, of which approximately 550 were related to foreign investment. Unfortunately, the laws are still very complex, and there continue to be numerous practical business difficulties posed by these legal and bureaucratic complexities.

One example of the problems foreign businesses face involved an American business with a partnership in China. The business was advised that it would be unable to collect its trade receivables because it had not complied with Chinese bank regulations. It was necessary for the company to bring in a third-party financial adviser to evaluate the situation and determine both the regulatory and bureaucratic issues and the solutions.

Other companies have found it difficult to repatriate funds back to the United States out of China after setting up local manufacturing operations. Teaming up with knowledgeable financial partners has allowed a number of U.S.-owned businesses to navigate the most basic and efficient legal means of setting up a third-party company in order to pay dividends back to the U.S. parent.

In looking to expand overseas, here are some basics to keep in mind.

  • Initially, keep the project simple, going with a time-tested product or process.
  • Set up a formal system of communication between management and key people abroad.
  • Be able to trade in local currency and employ basic currency hedging systems, and make sure all transactions in and out of the country can be tracked by your in-house financial officers.
  • Don't send troubled projects overseas. No matter how tempting it might be, you're not going to have the same amount of management control.
  • Be cautious when exporting any process that includes copyrighted material or patented product designs; you can't protect them overseas as well as in you can in the United States.
  • Factor travel costs into the overall cost of doing business overseas.

Expanding overseas involves a significant commitment of financial and logistical resources. However, if managed effectively, overseas expansion can improve productivity and increase profitability.

Finding and working with qualified local partners will make all the difference in ensuring a profitable, well-run operation.

JOHN BARRETT is senior vice president and division head of commercial banking at LaSalle Bank in Cleveland. His office is responsible for developing new banking relationships with mid- to large-cap companies throughout Ohio. As a subsidiary of ABN AMRO Bank, LaSalle offers an advantage that few banks can match; local support in more than 3,400 locations in more than 60 countries and territories. Anywhere your business takes you, LaSalle can meet your needs. Reach Barrett at (216) 802-2207 or john.d.barrett@abnamro.com.

Monday, 22 November 2004 11:09

Banking with a pro

A financial executive with a large global manufacturing firm recently met with his bank's relationship manager and foreign exchange representative to discuss a foreign subsidiary's large cash position in a foreign currency.

The executive was increasingly concerned about the potential financial impact of a significant shift in exchange rates, given the likely prospect that some of the cash might be needed to fund a U.S. expansion in the next 18 months.

The foreign exchange representative came to the meeting armed with more than current market rates. He brought detailed information prepared by the bank's foreign exchange strategist that outlined expected trends in exchange rates for the major currency exposures this executive managed. This data served as the basis for a discussion about various hedging strategies and the accounting implications of these strategies.

The financial executive used this information to make an informed decision about a hedging strategy. He now receives weekly updates on foreign exchange markets and talks frequently with his bank's foreign exchange representative about market developments.

This is one example of a banking relationship that provides value well beyond the traditional parameters of banking services. Many financial executives look to their bankers to provide a particular product or service.

But they often overlook the opportunity to consider the same banker as a resource for a wide range of information about subjects as varied as international markets, developments in debt and capital markets, economic forecasts and foreign exchange and interest rate risk management techniques. Experienced relationship managers can turn to in-house product specialists to provide information on topics of interest to a specific business or industry.

Commercial bankers also can serve as a valuable resource by introducing a wide range of contacts in the market. Bankers meet frequently with financial executives from other companies, as well as attorneys, accountants, investment bankers and other service sector professionals.

Clients who take the initiative and ask their bankers about other professionals may be rewarded with a valuable list of connections to businesspeople who can also provide information and advise accordingly.

Recently, the owner of a Northeast Ohio-based distribution company spoke with his banker about finding a potential buyer for his business. The banker suggested that the business owner contact two local boutique investment banking firms that specialize in sell side engagements, as well as a local attorney with clients interested in acquisition opportunities.

The banker also asked the business owner to consider selling a portion of the company to a newly formed ESOP. The banker introduced the bank's ESOP specialist, who provided detailed information on the benefits of an ESOP sale. The business owner came away from these meetings with information about the value of his business in the market and options for the potential sale of the business.

Executives who ask questions and request help from their bankers will benefit from untapped expertise. Financial executives who are willing to invest the time to learn about a bank's capabilities often are rewarded with information and ideas that can help them operate their businesses more efficiently.

Here are a few tips to consider when working with a bank.

* Look for an experienced banker who will bring financial ideas and solutions to the table. Share your business objectives and strategies with your banker and work together to improve your business.

* Take the time to learn about your bank's capabilities. If your business is large enough to support a relationship with several banks, find banks that have core competencies in the areas most critical to the success of your company.

* Get to know the product specialists at your banks. They often are the gateway to new ideas and information.

* Do not be afraid to ask for information on a variety of issues. Banks often are an untapped resource when it comes to information that can help you manage your business.

* Bankers are trained to identify and manage risk. Discuss with your banker the significant risk factors that affect your business and the tools or actions available to manage these risks.

* Banks may also be a great intermediary to other service providers or businesses experiencing the same challenges and issues facing your company.

John D. Barrett is a senior vice president senior vice president and manager of

the commercial banking division of LaSalle Bank in Cleveland. He is responsible for portfolio management and new business development. Reach LaSalle Bank Cleveland at (216) 802-2200.