Corporate Finance Adviser As Strategy Consultant Basic Information and Tutorials

Corporate finance advisers need to be responsive to changes in the wider business environment and help their clients review and adjust their forward business strategies accordingly. Even in the absence of significant changes to the business environment, company owners and managers should be encouraged to step back and revisit the fundamentals of their business thinking.

A good place to start may be the motivations, aims and objectives of the shareholders and/or directors for the future development of the business. If the company is unlisted, perhaps the intention is to build it
up for eventual sale or for a stock market flotation.

If the business is family controlled and managed, perhaps there is a succession problem that can be solved only by introducing and motivating new management. If the company is listed and its share price is languishing, perhaps it should consider going private again.

Alternatively, if a company has particularly high-performing shares it may wish to initiate an acquisition strategy using its shares as currency.

Turning to the business itself, the management and their advisers need to be satisfied that there has been sufficient research to identify the position of the company in its market place. Each element in a thorough SWOT (strengths, weaknesses, opportunities and threats) analysis needs to be examined thoroughly and analysed.

If the evidence is insufficient or inconclusive, additional research should be performed. The following are some of the critical issues on which the management must reach a clear understanding:

• environment analysis – the overall attractiveness of the industry; industry lifecycle; buyer segments; competitor analysis;
• competitive strategy – buyer needs; value chains; positioning the firm;
• organisational implications – achieving differentiation; achieving cost leadership;
• organisation analysis – structure and systems; culture and values; skills and resources;
• corporate and global strategy – restructuring? diversification?

In terms of the company’s own capability for success, the directors need to make an objective evaluation of the quality, depth and breadth of the company’s management, its structure, business systems and, where relevant, manufacturing systems.

Another key issue is the company’s ability to introduce new products successfully into existing and new markets – a critical factor in any decision to expand regionally or globally from local markets.

These investigations and the self-questioning process will enable the board and its advisers to formulate a strategic plan for, typically, the next five years ahead. The strategic plan becomes the framework within which the company will develop its more detailed business plans and the financing plan with a choice of financial instruments.

Inevitably, the process is reiterative: formulation, implementation, review and feedback. Typically, the planning loop would be of six months’ duration. As the strategic planning routines become implanted in management culture, so the process will become more intensive and self-critical.

The role of the adviser within this process is to maintain an objective external viewpoint, act as a facilitator and source of expertise, and guide the client as required to the realisation of their plans.