Engineering Inc - September/October 2017 - 28

RES OLV I N G THE
C- S UI TE D I LEM M A™
How to Manage the Demands of Competing Capital Claims
in an Architecture or Engineering Firm

By Chartwell's Chris Staloch
and Rich Chapman

Business leaders of every operating company share the common fundamental challenge of effectively allocating finite resources
against alternative capital claims. Acquisitions, capital expenditures, debt repayment, dividends, equity compensation plans,
taxes - the list is familiar and the list is long. However, Architecture & Engineering (AE) firms often carry one additional burden -
the pressure of continuous equity capital calls created by a broad-based ownership structure.
An AE firm's leadership team is frequently faced with the unique dilemma of effectively deploying operating cash flow while at
the same time maintaining a provision for the ever-present demands for shareholder liquidity. As such, creating a dependable
decision methodology requires that multiple possible financial scenarios be brought to light so they can be seen with clarity and
acted upon with confidence.
M a n a g e m e n t 's M a n d a t e
Having served the AE industry for over twenty years, Chartwell
has observed that the most common anxiety expressed by AE
firms' senior leadership is how to meet the demand of ongoing
shareholder buyouts without sacrificing growth or hampering
the company's cashflows. Assuming there is a desire to remain
independent, the stock held by each shareholder is only as
valuable as the company's ability to ultimately redeem it. Will
the long-term impact of shareholder equity claims impede
your company's ability to grow? This inherent tension creates
a paradox that is very real to every successful AE leadership
team, as they are knowingly creating their own long-term
dilemma!
Business leaders, sometimes after decades of building
the organization, find themselves asking "Now what?"
Operating cash flows, once projected to comfortably cover
the obligations to former and soon to be retiring owners, are
often no longer adequate. Once only a dull headache, the
pain has now become chronic, even acute. While this scenario
is most often encountered in mature AE organizations, it is
senior management's obligation to understand the emerging
issues, even early in the company's life cycle. Can these risks
be mitigated, and if so, at what cost to the company? Is a
"contingency reserve" the smart way to fund both emerging
shareholder buyouts and the rising costs of employee benefit
programs? How do we establish such a reserve without
hindering our liquidity?

Disruption of the Status Quo
What disruptive scenarios may emerge for the mature AE
organization? Here are examples of some of the most common
threats to maintaining healthy, sustainable growth:
The Economy. Economic setbacks or an unanticipated
downturn in profits, particularly for cyclical businesses
in the AE industry. This is typically accompanied by a
stress on working capital and sometimes a triggering of
violations of loan covenants.
Who's Driving the Value? Too much stock is held by former
employees (terminated participants in ESOPs) who are no
longer driving the value of the company. What are some

▪
▪

Chartwell is proud to be a Gold Sponsor of the ACEC 2017 Fall Conference


http://www.chartwellfa.com

Table of Contents for the Digital Edition of Engineering Inc - September/October 2017

Engineering Inc - September/october 2017
Contents
From Acec to You
Market Watch
Legislative Action
Eye on The Storm
Boost Profits, Reduce Loss
Innovations in Airport Design
Future Looks Bright for Vr
The Legend of Gridlock Sam
Focus on Philanthropy
Guest Column
Mergers and Acquisitions
Members in the News
Business Insights
Engineering Inc - September/October 2017 - Intro
Engineering Inc - September/October 2017 - Engineering Inc - September/october 2017
Engineering Inc - September/October 2017 - Cover2
Engineering Inc - September/October 2017 - Contents
Engineering Inc - September/October 2017 - 2
Engineering Inc - September/October 2017 - 3
Engineering Inc - September/October 2017 - From Acec to You
Engineering Inc - September/October 2017 - 5
Engineering Inc - September/October 2017 - Market Watch
Engineering Inc - September/October 2017 - 7
Engineering Inc - September/October 2017 - Legislative Action
Engineering Inc - September/October 2017 - 9
Engineering Inc - September/October 2017 - Eye on The Storm
Engineering Inc - September/October 2017 - 11
Engineering Inc - September/October 2017 - 12
Engineering Inc - September/October 2017 - 13
Engineering Inc - September/October 2017 - 14
Engineering Inc - September/October 2017 - 15
Engineering Inc - September/October 2017 - 16
Engineering Inc - September/October 2017 - 17
Engineering Inc - September/October 2017 - Boost Profits, Reduce Loss
Engineering Inc - September/October 2017 - 19
Engineering Inc - September/October 2017 - 20
Engineering Inc - September/October 2017 - 21
Engineering Inc - September/October 2017 - 22
Engineering Inc - September/October 2017 - Innovations in Airport Design
Engineering Inc - September/October 2017 - 24
Engineering Inc - September/October 2017 - 25
Engineering Inc - September/October 2017 - 26
Engineering Inc - September/October 2017 - 27
Engineering Inc - September/October 2017 - 28
Engineering Inc - September/October 2017 - 29
Engineering Inc - September/October 2017 - Future Looks Bright for Vr
Engineering Inc - September/October 2017 - 31
Engineering Inc - September/October 2017 - 32
Engineering Inc - September/October 2017 - 33
Engineering Inc - September/October 2017 - 34
Engineering Inc - September/October 2017 - 35
Engineering Inc - September/October 2017 - 36
Engineering Inc - September/October 2017 - 37
Engineering Inc - September/October 2017 - The Legend of Gridlock Sam
Engineering Inc - September/October 2017 - 39
Engineering Inc - September/October 2017 - 40
Engineering Inc - September/October 2017 - 41
Engineering Inc - September/October 2017 - Focus on Philanthropy
Engineering Inc - September/October 2017 - 43
Engineering Inc - September/October 2017 - 44
Engineering Inc - September/October 2017 - 45
Engineering Inc - September/October 2017 - 46
Engineering Inc - September/October 2017 - 47
Engineering Inc - September/October 2017 - Guest Column
Engineering Inc - September/October 2017 - 49
Engineering Inc - September/October 2017 - Mergers and Acquisitions
Engineering Inc - September/October 2017 - 51
Engineering Inc - September/October 2017 - 52
Engineering Inc - September/October 2017 - Members in the News
Engineering Inc - September/October 2017 - 54
Engineering Inc - September/October 2017 - 55
Engineering Inc - September/October 2017 - Business Insights
Engineering Inc - September/October 2017 - Cover3
Engineering Inc - September/October 2017 - Cover4
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