Why a financial advisor?
A financial advisor is specialised in negotiating acquisitions and divestments and can often apply experience of previous deals to finding solutions to transactions in hand. This applies particularly to deal structures, risk limitation solutions, performance related earn-outs etc.
Acquisitions or sales of companies are very intensive and time consuming and therefore place a considerable strain on the senior management of a company who also have their normal day-to-day management responsibilities. A financial advisor can usually alleviate the pressures of a transaction on senior management by addressing lesser issues and focussing senior management on the critical matters.
In a negotiation, the financial advisor functions as a buffer between his client and the buyers or sellers as the case may be, allowing optimisation of responses and avoiding being forced into hastily taken and insufficiently considered positions. This is particularly the case where the other party has a financial adviser or has large internal corporate finance resources.
Experience has shown that financial advisors are usually able to maximise the price of a company in a sale mandate well beyond what would be achievable without them and conversely are able to help finding the best possible price when advising clients on acquisitions. These price differences in the client’s favour are usually a multiple and often a large multiple of a financial advisor’s fees.
As a financial advisor is not part of a company, the financial advisor helps retaining confidentiality of a transaction as it facilitates limiting the number of people inside a company that are aware of a possible transaction.
The financial advisor complements the legal advisor on a transaction through a better understanding of complex financial issues and their implications for the client.