Business Acquisitions as a Tool for Proactive Financial Management: The Case of Seanergy Maritime Holdings

Abstract

Seanergy, as a former SPAC company and owner of six vessels that were acquired at historical all-time high values in the dry bulk industry, had managed to sustain its operations amid a challenging market environment by implementing proactive financial management. The weak freight environment that followed just 3 months after the acquisition of the initial fleet, declared that Seanergy would not be able to serve its hefty financing obligations in the long run. The secured cash flows, which stemmed from the significant premium of the attached charter parties over prevailing market rates, provided a short term cushion. During that period, the Management of the Company decided that the only way to shield Seanergy against a future cash deficit and accounting losses was to add more vessels with a daily break even low enough to cover the high break even of the initial six vessels resulting from their high financing cost. The proactive business planning exercise, highlighted the fact that accretive business acquisitions can lead to a lower average break even for the Company as a whole. Therefore, Seanergy, had implemented its proactive financial management, by acquiring two businesses over the next 2 years. The combined impact of the two business acquisitions, apart from more than tripling the size of the fleet, also led to increased revenue, kept operating income positive and augmented cash flows. Seanergy’s case, allows practicing managers in senior level financial positions to enrich their understanding about how business acquisitions can be used as a means of proactive financial management.