Corporate finance – buying or merging businesses, or organising substantial corporate financing – can be extremely important for your business and you personally as the owner. Thorough planning and clear objectives are key.
Major activities like these occur relatively infrequently, so in-house teams may have little relevant experience and expertise. Getting the right corporate finance advice is essential.
In most companies, the finance director takes the main responsibility for corporate finance. But the typical finance director may rarely – or never – have been involved with a substantial corporate financing transaction such as buying a business.
If your plans involve corporate finance, you should consider whether your management has the right expertise. You may want to appoint a finance director with previous experience, or to strengthen the board with a suitable non-executive director.
You may also need specialist advice to help you through individual transactions. You may have an existing lawyer who can help with relatively straightforward small-business funding issues – for example, checking the terms of a lease or negotiating to limit the extent of personal guarantees. But more complex transactions are likely to need the involvement of a specialist. Similar considerations apply to your accountant.
Major transactions such as selling your business may also need help from a corporate finance specialist.
Having a clear strategy in place is crucial for success. For example, floating your business might be the best option if you want to grow the business by acquisition in the future, but other ways of raising finance can be quicker and more cost-effective ways of raising capital.
You need to think through the company’s objectives and your own personal objectives. For example, if you plan to retire and pass your business to your family, you need to consider issues such as whether your children are really the best people to run the business. You may need legal advice to help you manage conflicts between your personal objectives and responsibilities as a director.
A business plan is essential for any kind of corporate finance activity, from corporate financing to acquisitions or planning your business exit. The plan helps crystallise your thoughts and provide evidence for any backers whose support you need. The further in advance you can plan, the easier it is to make the most of different options, particularly in areas such as tax planning and grooming your business for sale.