Michael Pay, award-winning financier and co-founder of EMC Corporate Finance takes us through the basics of what a corporate finance company does

Over the past year (or maybe that should be 30 years), I have written numerous articles along similar lines: “How to buy and sell a business,” “How to value a business,” “Mergers and Acquisitions – the pros and cons,” but recently, after our team won Corporate Finance Team of the Year, someone asked me “but what is corporate finance and who is a corporate financier?”

Like many of us in business, what seems obvious to ourselves, can be an anathema to others! So, I will try an explain. Corporate finance is the work performed to undertake transactions in business where there is some form of capital need or event, and a corporate financier is the person who advises clients on the subject.

Here’s a closer look at some of the areas of corporate finance advice:

Raising seed, start-up, development, or growth capital

Corporate financiers play a crucial role in the financial operations of companies, assisting them in raising capital, making strategic investment decisions, and optimising their financial structure. Essentially, a corporate financier acts as a trusted advisor to corporate clients, providing expert guidance on various financial matters to help them achieve their business objectives. Here’s a closer look at what corporate financiers demand how they add value to their clients:

Raising capital

One of the primary responsibilities of a corporate financier is to help companies raise capital to finance their operations, expansions, or acquisitions. This involves evaluating different funding options such as equity, debt, or hybrid instruments and structuring deals that align with the company’s financial goals and risk appetite. Corporate financiers leverage their expertise in financial markets and investor relations to identify potential sources of capital and negotiate favourable terms for their clients.

Mergers and acquisitions (M&A)

Corporate financiers play a key role in facilitating mergers, acquisitions, and divestitures by advising clients on valuation, deal structuring, due diligence, and negotiation strategies. They help companies identify suitable acquisition targets or merger partners, assess the financial implications of a transaction, and navigate regulatory and legal requirements. Corporate financiers also assist in securing financing for M&A transactions and optimising the post-merger integration process to maximise synergies and value creation.

Financial strategy and planning

Corporate financiers work closely with senior management to develop and execute comprehensive financial strategies that support the company’s growth objectives and enhance shareholder value. This may involve analysing market trends, conducting financial modelling and forecasting, evaluating investment opportunities, and formulating capital allocation policies. By providing strategic insights and financial expertise, corporate financiers help companies make informed decisions that optimise their capital structure, mitigate risks, and drive sustainable long-term growth.

Strategic advisory services

Beyond traditional corporate finance activities, corporate financiers offer a range of strategic advisory services to help companies address specific challenges or capitalise on emerging opportunities. This may include strategic planning, market entry or exit strategies, capital budgeting, corporate governance, and shareholder activism. Corporate financiers serve as trusted advisors to corporate boards and executives, providing objective analysis, actionable recommendations, and ongoing support to enhance business performance and shareholder value.

As corporate financiers, our job is to guide and advise clients on the differing needs that the business has throughout its life for capital, where it can be obtained from and what is good value and what is bad value.

Take Client A, who came to us wanting to sell his business. The owner, a highly successful entrepreneur, wanted to sell his business and focus on other philanthropic areas of his life. Working with them over a number of months, two things became apparent. The first was that he still loved the cut and thrust of corporate life, and the second was that no matter whether they were actively involved in the day-to-day running of the business, they still had time for their philanthropic endeavours.

What we then realised was that the impact of selling the company would be to crystallise not just a significant capital gain, but also an Inheritance Tax problem. By cashing in, they would lose the benefit of what is known as Business Property Relief in the event of their death. Our advice was that rather than sell the business, they invest in more businesses, coupling their joy at seeing ambitious wannabe entrepreneurs succeed whilst protecting their wealth for the future.

Or consider Client B. Every year, the finance team had to refinance another loan as the company had numerous loans maturing at different dates. When the larger one came for renewal, we were asked to help find the best deal. Reviewing the business, we advised that they refinance everything and added in a top up facility that means they would not have to look to finance anything for the next five years. This solution allowed the management team and finance function to focus on a longer term strategy, rather than the need to seek new finance every year.

These are just two examples of how a Corporate Financier can take a different approach to to achieve a better outcome for the client.

In summary, corporate financiers play a multifaceted role in guiding companies through various financial decisions and transactions, from capital raising and M&A to strategic planning and restructuring. By combining financial expertise with industry knowledge and strategic insight, corporate financiers help companies navigate complex financial markets, seize growth opportunities, and achieve their long-term objectives. Their contributions are instrumental in driving corporate success and creating value for stake-holders in today’s dynamic business environment.

Michael Pay is co-founder of EMC Corporate Finance – the South East’s pre-eminent award winning corporate finance team. Michael recently won Dealmaker of the Year, crowning him as the best dealmaker in the region.