Why Use a Corporate Finance Adviser?

Why Use a Corporate Finance Adviser?

We have now heard the official word from Chancellor Rishi Sunak that the Coronavirus crisis is likely to cause "a severe recession" this year. The hope of a V-shaped recovery is now viewed less likely than previously thought.

For any business owner or management team, this is only confirmation of what they are seeing on a daily basis.

On-going Government support has already been signalled and the ambition of Rishi Sunak and the Government to minimise any uplift in unemployment and to continue to keep businesses afloat has been clear throughout recent weeks and months. Initiatives like CBILs, Bounce Back Loans and the Future Fund are all evidence of that.

This readily available funding seeks to maintain stimulus and activity in the economy. Meanwhile, the funding landscape has changed significantly recently. Most of what we are hearing and experiencing tells us that interaction between banks and customers has improved and simplification of application processes (largely due to Government intervention) has also meant that businesses have been able to progress conversations with banks much more easily. Long may that continue.

However, we also know that at some future date this landscape of ready access to bank funding, government grants and an amenable and flexible HMRC will change. Closer scrutiny of results, reduced risk appetite of lenders, reduced revenues and a backlog of deferred creditors will present a new and very different set of challenges.

Whenever this is, and it may be as early as the Autumn this year, it will fall at a time when management time is at an absolute premium. Focus will need to be on cashflow management, employee safety and well-being, supplier and customer relationships and supply chain management to name but a few "red hot" topics. Layering on top of this, managing a refinance or financial restructure process will test management "bandwidth".

With all of that in mind, use of the right advisors giving the right advice is key. No-one will know the business better than its management. However, a good Corporate Finance advisor will bring

  • Challenge - Challenge and interrogation of any proposal before it gets to funders.
  • Knowledge - Market knowledge of funding options, lender appetite and the lending process.
  • Resource - Committing the time and seeing the process through to successful completion.
  • External counsel - Impartial input on some of the hard decisions.

The funding market is going through a revolution, accelerated by Covid-19 and business needs to avail itself of this knowledge if it is going to survive and thrive. Engaging the right advisers who deal with this process day in, day out can give you the successful edge.

Dave Shalliday, non-executive director at corporate finance adviser Verde and a former regional director at both Santander and RBS, endorses that viewpoint. "You can usually tell when a 'DIY' application has been submitted. The basics may be there, but clear presentation and understanding around model assumptions, clarity on revenue targets and knowledge of lending criteria will almost always be missing," says Shalliday. "Businesses almost always end up engaging advisers part way through a process and as a result, that process can be more costly - not only in terms of fees, but not engaging early causes delays in the process too.

It is a standard question asked at all credit committees in all the main lenders "Are management accessing independent third party, professional advice?". The answer to this question will inform the lenders view of the business management. If management are concerned with cost they should also be concerned with the real and hidden costs of not accessing professional advice and input."

Corporate finance advice goes far beyond speaking to the funders. The whole process from understanding and establishing the deal structure, presenting the correct and relevant information with a well-supported application pack through to managing the relationship between business and funder comes with the badge. A good adviser will utilise and draw on experience from completing many other successful deals to get your deal over the line.

Verde also expects financial restructuring deals to come to the fore in the coming months. Careful presentation will be even more important here as lenders need to see that a re-jig of facilities will support viability of a business. "Combined experience of corporate finance, banking and financial matters should be a key part of a business's advisory team going forward," says Craig Blackmore, director at Verde Corporate Finance. "If the M&A market becomes as active as is hoped and is needed to be to get the UK out of a recession, then banks will become more and more selective on deals. As a consequence, getting the facts right will be even more important. Businesses not engaging the right advice will do so at their peril, as the cost of lost time, money and opportunity could weigh heavy on their business future."

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