Will you fly a plane if you don't know how to do it? Probably only if you have no choice.
Why, then, would you fly solo on high-stakes business transactions when doing so can mean catastrophic losses for your company? This is especially incomprehensible when transaction advisory services (TAS) exist for this very purpose. That’s like bypassing a perfectly capable pilot so that you can fly the plane yourself.
If you’re wondering whether you need TAS consultants for specific transactions your business is cooking up, read on.
The following are five types of transactions expert advisory and guidance will help you do right.
Business valuation refers to the process of objectively determining a business’ economic value. To put it rather simply, it asks and answers the question, “What is your business worth now?”
A business valuation is typically initiated when a business is making a pitch for funding, applying for a loan, selling part of or the entire business, or considering a merger with another company.
Of course, you may undertake the process for other reasons. Even if you simply want to get an objective appraisal of your business's current worth, you can get a business valuation.
Business valuation requires a valid framework. More importantly, it requires experience.
An expert has a unique point of view and a deep well of business valuation experience to draw from, so they’re the best people for the job.
Suppose you are taking over an existing business in Dubai or Abu Dhabi. You run an international logistics and fulfillment company, and you plan to strengthen your presence in the Middle East through this particular acquisition.
Looking at your target company’s balance sheet, you immediately see that it has impressive assets and manageable liabilities. The profit and loss statements also show the company is in the black. Finally, your reading of the cash flow statement shows the company is cash-flow positive.
Should you or should you not push through with the acquisition in this scenario?
The correct answer is: Defer your decision until after you've had an expert TAS consultant conduct financial due diligence.
Financial due diligence experts do not ever take financial statements at face value. They have deep experience investigating and analyzing balance sheets, income statements, cash flow statements, annual reports, and other financial documents. Essentially, they will ensure that everything written in the company’s financials is accurate and valid.
With their help, you can verify your target company’s valuation and future projections. They will confirm the information and can also help you uncover the risks if any, to help you get the leverage at the negotiation table.
Are you trying to raise capital for your expansion or the next phase of business development? Be careful, for there are potential pitfalls to do-it-yourself solutions.
For one, raising capital can take time. It can take even longer if you don't know what you’re doing. Having a business consultant advise you from the get-go will help you manage your expectations and avoid unnecessary delays.
Next, you have to decide whether to obtain equity or debt capital. Each will require a different approach and distinct preparations. However, your business consultant will be able to advise you on the best way to go, given your specific circumstances.
They will help you assess the pros and cons of each approach, so you can minimize risks such as losing control over your business or forfeiture of your business assets.
Indeed, when raising capital, it would be best to obtain the services of a business advisor who can do the following:
● Make financial restructuring recommendations and decisions.
● Guide you on the optimal corporate financing structure.
● Help in the preparation or evaluation of offering materials.
● Assist in finding funding sources.
● Help you in creating your funding pitches.
● Provide support at the negotiation table.
● Help you push for a commitment from the funding party.
● Provide oversight on the process to ensure a timely conclusion.
What are your business objectives, and how do you plan to achieve them? This, in a nutshell, is what the business plan answers.
A business plan is essential to any company that wishes to obtain funding. Naturally, would-be investors need to see that a business has a viable strategy to grow and profit. Lenders might also want to ascertain the same before granting you a business loan.
Meanwhile, an investor pitch deck summarizes the salient attributes of a business plan. If the business plan is detailed, the pitch deck must be brief but impactful, highlighting only the plan’s most essential and persuasive points.
If you want a business plan that can withstand the rigorous inspection of investors and lenders and a business deck that effectively communicates the gist of your plan, seek the help of a business consultant.
An expert business consultant can help you come up with a business plan and investor pitch deck that:
● Clarifies the problem or opportunity your product or service solves.
● Uses persuasive language to convince investors or lenders why and how your product or service solves the problem you’ve identified.
● Refines your business model.
● Emphasizes your competitive advantage.
● Clearly states your funding requirements.
● Provides a clear exit strategy.
Whether you’re selling or buying in an M&A, you will benefit greatly from the services of a TAS consultant. In M&As, a lot of things have to be ascertained and analyzed. For instance, you will need to determine the value of both businesses to ensure fair stock swap terms.
Aside from drawing up a business valuation, business advisory consultants can help sellers develop their investment teaser and prepare a confidential information memorandum. Meanwhile, they can help buyers identify acquisition targets.
For both buyers and sellers, advisory consultants can help determine the transaction structure, draft the letter of intent, and finalize the purchase agreement.
Do not underestimate the value of experience and expertise in business.
If you need to get a business valuation, conduct financial due diligence, raise capital, prepare a business plan and investor pitch deck, or proceed with a merger and acquisition, don’t do it yourself.
Seek the help of experienced and skilled business advisory consultants.
Ratheesh C. Ravindranathan is Managing Partner at Affility, a comprehensive advisory services firm assisting clients in the UAE and worldwide with IT, risk and management consulting solutions. A specialist FinTech professional with over 15 years of industry experience, Ratheesh holds an MBA and was involved in many M&A transactions and strategic planning engagement during his tenure in the UAE.