Corporate finance consulting is needed for various reasons ranging from loan applications to estate planning, attracting investors, and so on. Today, this blog will tell you about business valuations during mergers and acquisitions, and how corporate finance consulting firms can help in this scenario.

The Role Of Business Finance Consulting Services For Mergers And Acquisitions

From Vodafone and Idea, Snapdeal and Flipkart, Tata and Corus Steel, Zomato and Uber Eats, the list is long when it comes to mergers. However, every merger that takes place does not happen overnight. There is a lot of planning, unplanning, and strategic thinking that takes place. While the stakes are high and the goals are to be met, corporate finance advisory plays a significant role in business valuation, be it for mergers or acquisitions.

Let’s first begin with the process of business valuation:

-Corporate finance consulting firms recommend market-based, income-based, or asset-based valuation methods. The corporate finance advisory does this by considering the target company’s industry, financial health, and prospects. In this way, they can arrive at a fair market value.

-A corporate finance consulting expert can analyse the latest merger and acquisition transactions in similar industries. This helps establish valuable benchmarks for comparison and gives a practical valuation range for the company.

-Companies can build robust financial models with the help of experienced financial advisors. This can help forecast the target company’s future cash flow, growth potential, and profitability. Making these projections can help the company develop income-based valuation methods and give insights into the company’s long-term value.

-When a comprehensive business valuation is done, it makes a company smarter when dealing with negotiations during mergers or acquisitions. This can help the company justify a proposed purchase price for the buyer or make sure that the seller gets a fair price for their company.

Moving onto corporate finance advisory beyond business valuation:

-Financial advisors can conduct a thorough examination of the company’s financial records to identify potential risks and liabilities impacting the deal structure.

-Therefore, considering factors such as financial options, tax implications, and the type of transactions, financial advisors can advise on the most advantageous financial structure for both parties.

-Financial advisors can also coordinate with accountants, lawyers, and investment bankers to ensure a smooth and productive flow of the negotiation process and closing stages.

By leveraging financial expertise, a company’s success is significantly increased during the merger and acquisition processes. Connect with a corporate finance consulting firm to discuss your business valuation needs.

FAQs

1.  How can a corporate finance advisory recognise whether a company needs a merger or an acquisition?

Corporate finance consultant firms are equipped with the expertise and experience to assess the right approach for a company’s decision to either do a merger or an acquisition. They first start by understanding the client’s goals in terms of what the company plans on achieving. For instance, market expansion, cost reduction, access to technology, or improving profitability.

Once the company’s goals are established, the following is done:

-Financial advisors conduct a comprehensive analysis considering the industry and market position, financial performance, and the compatible fit between the two target companies.

-A feasibility analysis is done to check whether the target companies should enter a merger or acquisition.

-Models can be created to assess the financial impact of both the merger and acquisition like projected synergies, cost savings, and overall profitability.

2. When should a company wait until it’s the right time to consider doing mergers or acquisitions?

A company may be compelled to do a merger or acquisition when things are visibly up or down in a company. However, professional financial advice is needed to assess the situation before giving the go-ahead to do either of the two. Some of the red flags that signal not doing a merger and acquisition include:

-Unclear goals

-Only focused on short-term gains

-Lack of synergy between two industries

-Inflated price for the target company

-The acquirer is financially strained

-Hidden liabilities that may drain financial resources