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Case study
Capital structure and financing
Nexia Samduk’s client is a highly esteemed IT services company with a strong reputation in the industry.
Renowned for its successful acquisition of IT development contracts from both government agencies and major corporations, the company proudly boasts a formidable team of 300 skilled IT developers. Furthermore, the company’s prudent financial management resulted in a debt-free balance sheet six years ago, setting the stage for an exciting journey.
The client challenge
The company experienced swift expansion in Seoul, but it faced a common challenge – the escalating rental fees in a city where securing and maintaining leased office spaces can be daunting. Landlords regularly raise rent, creating discomfort for entrepreneurs, including the company’s founder. Nexia Samduk advised their client to explore the possibility of acquiring a five-story building in the dynamic, and world-famous, Gangnam district of Seoul. This strategic move promised to make the annual cost of ownership comparable to the interest payments linked with leveraging bank financing. The client embraced this recommendation, marking an important decision for the company’s growth trajectory.
The solution
With Nexia Samduk’s guidance and a well-structured capital utilisation strategy, their client successfully obtained a substantial loan of approximately USD 20 million. This strategic financial move not only replaced their previous rental expenses but also transformed them into manageable bank interest payments. Five years later, the foresighted investment has proven to be exceptionally lucrative. The market value of the property has doubled, bringing significant returns, and leaving their client immensely satisfied with the outcome.
The client follow-up challenge
Recently, their client faced another challenging situation when a major social media platform encountered a significant IT incident. The ensuing investigation by the Minister of Internal Affairs in South Korea cast a shadow on the client, leading to unfavourable media coverage and the loss of several key customers. This unfortunate sequence of events created a pressing concern for the client as cash flow became an important concern with the loss of their clients from the negative press.
The follow-up solution
Nexia Samduk played an important role in facilitating the approval of the operating loan application at the bank. Thanks to the substantial collateral value of the building owned by the client, the bank rapidly extended the much-needed loan as, a bridging facility, to satisfy their short-term cash flow liabilities. Today, the company’s owner enjoys a sense of security, knowing that their real estate asset serves as a valuable cushion during turbulent times, proving to be instrumental in successfully navigating challenging times.
About the Nexia Member Firm
Nexia Samduk is South Korea’s 5th largest accounting firm, providing a wide range of audit, tax, and advisory services to local and international clients since their establishment in 1976. As the oldest accounting firm in South Korea, their rich heritage is a testament to their unwavering commitment to excellence.
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