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Very few business owners will go through their working lives without facing some form of significant transaction. It might be acquiring another company in order to accelerate growth, seeking new funds to finance expansion or selling all or part of the business to capitalise on the years of hard work spent building and running it.
Either way, it will be a big deal for everyone involved. And as most people only ever get to be involved in such a major transaction once or twice in their lives, it pays to get it right. That means getting the right advisors. Accountants to advise on tax and other financial ramifications, solicitors for all the legal stuff, and a corporate finance team to pull it all together and ensure everything runs smoothly.
We know that some people feel they can do away with the last of those. They’re wrong! A good corporate finance advisor is probably the most important appointee. Of course, I would say that wouldn’t I. After all, I’ve been running the South East’s leading independent corporate finance firm for the last 30 years.
But let me outline to you why I believe it’s vital to have a corporate finance advisor on board and see if, by the end, you agree with me.
No one knows your business like you do. You’ve probably lived and breathed it for the last several years. But making the big decisions can sometimes be daunting. Facing a potentially life-changing transaction can be doubly so.
Appointing an advisor early on will help. They will provide you with a sounding board for your plans, provide input where necessary, spell out the challenges you are likely to face and what you need to do to ensure success.
The chances are you won’t have been through a major transaction before, so your advisor can tell you how things will work, who needs to be involved and what will be expected from them. You can then plan your resources accordingly.
Unfortunately we don’t all have the powers of foresight. Opportunities can arise when we least expect them, so best be in a constant state of preparedness. If you’re looking to sell, your corporate finance advisor will help ensure that any issues that could deter potential buyers are properly addressed and that business plans and financial records are up to date. If you’re looking to make an acquisition, the advisor will assess your finance options to ensure they are do-able, and stress-test your post-completion integration plans.
Whether buying, selling or raising finance, the chances are you will need to engage with third parties. You may well have your own ideas about who to approach, but an experienced and active corporate finance advisor would be able to supplement this and, through diligent research, provide you with a comprehensive ‘attack’ list. Time invested in research early on will reap rewards later on in the process.
Any transaction, even the seemingly straightforward ones, can be time-consuming. They can also be a major distraction for senior management. The day-to-day running of the business can suffer if important eyes are taken off the ball. That’s where an advisor comes in. Your job is running the business. Our job is running the transaction.
Although no two deals are ever the same, they all follow a similar path. We ensure that everything is kept moving from the initial research and preparation, through to contacting potential targets, handling negotiations, preparing and signing heads of agreement, carrying out due diligence and handling the final legal documents.
Whilst the pathway will be similar for most deals, there is every likelihood that obstacles will be encountered on the way. Having an experienced advisor by your side will ease any stresses arising from intense and occasionally fractious negotiations. They will ask all the awkward questions, have the difficult conversations and generally take the pressure off you.
They will know when to play hardball and when to offer concessions. And they will help to keep things in perspective even when they appear to be going pear-shaped. With so much riding on the outcome, and the near certainty of the journey being beset by difficulties at some stage, it is not a route to be travelled alone.
Once agreement has been reached and all the due diligence carried out, the lawyers prepare the legal documents ready for signing. Your corporate finance advisor will make all the necessary arrangements and be there when pen is finally put to paper, ensuring that all the commercial aspects of the deal have been correctly documented and reflected.
Of course, all of this takes time – sometimes lots of it – so fees are involved. You will need to ensure that the added value your corporate advisor brings to the deal will far outstrip the costs involved. To reduce your exposure to large fees, get a quote in advance and try to agree a fixed price.
Above all, make sure that what you see is what you’re going to get. In other words, check that the senior person ‘selling’ you his or her firm’s credentials to support your transaction is the same person who will be your lead advisor throughout. What you don’t want is the job to be assigned to a more junior advisor once the appointment has been made.
As Baden Powell famously said: Be prepared. You never know when an opportunity is going to come your way.
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