It is extremely important for companies to find the right investment financing in order to expand their existing investments or make investments in different areas, without disturbing their balance sheet structure, and to reach different financing sources and instruments as much as possible while doing this. Finance and Banking Lecturer Gizay Daver says that the interest in corporate finance has increased in recent years.
Can we get to know you first? What do you do?
Hello, my name is Gizay DAVER, I successfully defended my doctoral thesis that titled “Turkish Banking Sector Performance Analyzes After The 2001 Crisis” in 2015, and I got the right to use my doctorate in banking and finance. Since 2017, I have been working as the Head of Finance and Banking Department at Zonguldak Bülent Ecevit University. I am a member of the Global Risk Experts Association, one of the professional organizations, and I have the Derivative Instruments License, one of the Turkish Capital Markets Licensing documents, as well as the advanced license certificate, which is called the capital market activities level 3 license certificate with its current name. I take an active role in various institutions and organizations such as the Ministry of Justice, Expertise Department, Banks Association of Turkey, work for the establishment of a healthier and more transparent financial system, and engage in various volunteer activities to prepare future generations for their finance – banking career.
The financing resources of the investments are divided into equity resources provided by the shareholders or owners of the company and external debt resources provided to the company.
What are the financing sources of large-scale construction investments?
Within the framework of the overview, there is a dual distinction, independent of scale. The financing resources of the investments are divided into equity resources provided by the shareholders or owners of the company and external debt resources provided to the company. The portion provided by the partners is called internal resources, and the portion provided by the lenders to the company is called external resources. External sources are referred to as the principal bank or banks. Although the financial resources are many and varied depending on the level of development of the financial system, various private and legal entities that believe in the success of the investment to be made by the company are considered as the main financing source of investments in the finance industry.
The most basic transaction is consultancy services about what the source of funds will be for financing investments and how it will be provided.
Are there any construction companies with strong corporate finance in Turkey?
Before answering this question, we first need to clarify what we need to understand from corporate finance. We observe that the concept of corporate finance is used to describe investment banking activities in our country. Within the scope of investment banking, we can consider the consultancy and information provided to institutions and organizations in the realization of large and complex financial transactions. Bank of America, Credit Suisse, Goldman Sachs, Morgan Stanley, JP Morgan are the world’s leading investment banks and charge their clients (maybe the construction companies in our question) for the service they provide. The most basic transaction is consultancy services about what the source of funds will be for financing investments and how it will be provided. Some of the construction companies in our country benefit from corporate finance on a national scale and some on a global scale and display a strong outlook.
Interest in corporate finance increased in construction investments
Do companies prefer corporate finance method in large-scale projects?
We know that the interest in corporate finance has increased, especially after the millennium, with the increase in awareness of the importance of financial literacy following the strengthening of the private sector in our country. In many large-scale projects, mergers and acquisitions, corporate finance is utilized and investment debt instruments are used; In fact, we see that 2021 has been declared the year of public offering. We observe that the corporate financing method is preferred in both the borrowing and equity aspects of financing.
It is absolutely necessary to get support from professionals for a large-scale financial investment
What is the average payback period for construction project investments?
It would be misleading to generalize for this question. The estimations made regarding the payback period without having sufficient information about the investments are made with a series of simplifying assumptions such as the ratio of the required investment amount to the annual cash flow series of the project to be realized. Even when considered in its simplest form, projection errors related to cash flow can cause the company to face irreversible results that cannot be compensated. I think that it is absolutely necessary to get support from professionals for a large-scale financial investment. Although it is possible to see a period of 2 – 2 ½ years under very good conditions, a return of 5 years can also be observed. Considering a construction project with an average economic life of 40-50 years, the longer the payback period, the greater the risks to be exposed. Each project should be evaluated under its own unique circumstances.
A delay in the implementation of the construction project will have an impact not only on the project but also on the company
How do delays in the implementation of the construction project affect the return on investment profitability?
Factors that have an impact on the cash flow series in a project implementation are vital to the project. A delay in the implementation of the construction project will have an impact not only on the project but also on the company. We perform our practical financial calculations under various assumptions. These assumptions can be constructed to include the possibility of the economic conjuncture going through various phases and various risks specific to the project. Projections prepared by considering alternative scenarios that may be encountered ensure that companies are prepared for various conditions and make it possible to manage risks on investments.
It is not always possible to compensate for investment losses caused by investment project delay
How can the investment losses arising from the project delay be compensated?
Unfortunately, it is not always possible to compensate for investment losses caused by investment project delay. For this reason, when a big project is going to be evaluated, it is useful to get support from a professional team in the field. Investment losses that remain at a manageable size can be compensated with alternative financing opportunities. There are various solutions to prevent a project that is already in loss from dragging the company into financial stress due to administrative lines.