Having spent a decade working in a job that even his closest friends and family don’t quite grasp, Wayne Horwood shares his thoughts on what it actually means to be a corporate financier.
Over the last decade, I have been asked on many occasions to explain what I mean by “corporate finance” and what I think makes for a good corporate financier.
Generally speaking, the term corporate finance covers the provision of advice or assistance with one or more of a range of business transactions. That could be a company sale, an acquisition, a management buy-out, raising capital, or restructuring a company’s finances.
In terms of what a corporate finance advisor actually does in each of these situations, it varies from case to case, but typically involves helping a client to prepare a business plan and financial projections, analysing historical financial performance so as understand the key trends and factors that could impact upon the business’s ability to grow, researching potential investors, acquirers or acquisition targets and then finally project managing the deal through to completion. At times it can feel rather like herding cats, but ultimately our role is to ensure that the various parties work together to get the deal over the line.
To my mind, however, there is so much more to our role than simply providing the correct advice during a transaction; in reality, advising on a transaction is often the easiest bit of what we do. What often goes unseen or perhaps unappreciated, is that before getting to the point of transacting a deal, we will usually invest several months or indeed years with our clients, working with them to ensure that what they want to achieve is clearly defined and understanding how their corporate objectives align with their personal goals. Trust is crucial in this relationship and to earn trust you have to be honest with your client and with yourself.
Why trust is crucial in corporate finance
“When I met you, you were just another person looking to do business, but now I see you as a friend as well as a trusted advisor”. Co-founder, Seven Technologies
If I had to define succinctly what I mean when I refer to being a “trusted advisor”, I would say that it is characterised by being prepared to challenge your clients, to disagree with them, and to tell them what they might not want to hear. For example, someone may approach us with a view to selling their business, despite it being apparent that they aren’t quite ready to do. Perhaps they need to invest in their management team, or their reporting systems aren’t up to scratch. The easy thing to do would be to take the appointment and bank the fees; the right thing to do and what someone who aspires to become the trusted adviser should do, is to focus not on the short-term fee income, but the value that can only be derived from a lasting relationship built on a foundation of mutual trust and respect.
“Without the direction and focus created by HNH, it’s very unlikely the company would have realised such an attractive investment for the founders. The challenge function injected into the business pushed the senior management team to focus on what was required to structure the company for external investment”. Co-founder, Seven Technologies
The ability to choose the right path, rather than the easy path, even if it means advising a client not to do something is, to my mind, key to success in this business.
“At the time, I didn’t always like what they had to say, but, with the benefit of hindsight, I recognise that HNH’s ‘devil’s advocate’ stance was a fundamental aspect in the successful sale of our family business”, Mark Nelson, Nelson Hydraulics.
The most important factor in any transaction is that the people involved in it trust each other – our client must trust us and we must trust them. The only way to get to this point is to invest a considerable amount of time, getting to know the stakeholders, the team dynamic, their attitudes to risk, their aspirations and, ultimately, what makes them tick as individuals. As an adviser, we have to be honest with our client in the knowledge of what they really want. They in turn have to value our opinion.
“What HNH got right in advising Fleming was not just the technical corporate advice (which was solid) but they understood the unique family business dynamic, that intangible factor which means in that situation the right business advice is not always the text book advice. The ability to understand the weaknesses of the company and to utilise the strengths was as important as the corporate expertise. The mix meant we managed to find the right answers to our situation.” Andrew Fleming, Fleming Ltd