3.3 Management of Capital Invested in Assets 23streams. Factoring and securitisation can be said to belong to this category, and
the assets of the target are an important source of takeover finance.
Sell but continue to use. Many of the transactions that reduce external funding
needs or release capital mean that the firm sells assets but continues to use them.
Sale and lease-back transactions obviously belong to this category. On the other
hand, one could say that even factoring and the securitisation of customer receiv-
ables enable the firm to release capital but keep its most important asset, that is,
the customer relationships which are the source of its business.
Use instead of buy. Some transactions mean that the firm just uses assets with-
out buying them. Leasing transactions are not the only transactions that enable the
firm to do so.
Asset investors. Leasing companies belong to a larger category of investors that
will hereafter be referred to as “asset investors”.
Asset investors can range from owners of premises in which the firm operates
to owners of intellectual property rights that the firm may use under a licence
agreement, and from providers of operating leasing services to network partners
whose distribution channels or resources the firm uses in its operations. In a broad
sense, even employees and managers can be regarded as asset investors.
Although there are many types of asset investors, it is characteristic of them to
enable the firm to use certain assets without the firm having to buy them. The par-
ticular legal aspects of asset investing depend on the contract type (see section
9.2).
The wide range of asset investors can be illustrated by the case of Carlos Tevez and Javier
Mascherano. Before 2007, these famous Argentine football players still had no experience
in the English Premier League. In the absence of verifiable information about how they
would adapt to the game as it was played in England, no football club was prepared to pay
a high transfer fee for their contracts. However, the economic rights to Carlos Tevez and
Javier Mascherano were owned by a company called MSI acting as an “asset investor”.
MSI permitted West Ham United FC to take Tevez and Mascherano on loan. After the
players had shown that they could adapt to the English game, MSI was able to negotiate
better deals with other football clubs. In 2007, Mascherano went to Liverpool FC and Te-
vez to Manchester United FC.
Chain structures. The use of a chain of legal entities can reduce the top entity’s
own funding needs, where one entity always controls another and each entity in
the chain has raised funding from external non-controlling investors (for chain
structures and other control-enhancing mechanisms, see Chapter 7).
3.3.2 Excursion: IFRS and Derecognition
Whether the use of leasing or sale and lease-back will release capital as intended
can depend on the applicable accounting rules and what is known as derecogni-
tion.
Financial transactions will help the firm to release capital provided that the fi-
nancial assets that they relate to are removed from the firm’s balance sheet (derec-