Corporate Advisory Services

• Financial services refer to services provided by the finance industry.

• The finance industry encompasses a broad range of organizations that deal with the management of money.

Among these organizations are

– banks, – credit card companies, – insurance companies, – consumer finance companies, – stock brokerages, – investment funds and – some government sponsored enterprises.

• As of 2004, the financial services industry represented 20% of the market capitalization of the S&P 500 in the United States.

Corporate Advisory Services

• A business requires advisory services in a number of domains.

• Some entities have multi disciplinary teams that provide advisory services on issues that cut across domains, while others specialize in specific domains.

• Corporate finance advisory means the advisory services that are provided to the various corporate bodies about the financial aspect of their operations.

• These services may be provided by the advisory boards of the companies or by professional bodies who deal in such services.

• The companies that provide advisory services in the domain of corporate finance provide services in the following fields: – Corporate Finance in Solutions related to

Problems of Business Operations – Corporate Finance in Mergers and Acquisitions – Corporate Finance in Planning of Business Services – Corporate Finance in Generating Funds

Corporate Finance in Solutions related to Problems of Business Operations

• These are transactions based involved in the Business operations.

• Examples could be tax and accounting as well as Regulatory advisory

Corporate Finance in Mergers and Acquisitions

• Merger refers to the aspect of corporate strategy, corporate finance and management

• dealing with the buying, selling and combining of different companies that can aid, finance, or help a growing company in a given industry grow rapidly

• without having to create another business entity. • An acquisition, also known as a takeover or a

buyout, is the buying of one company (the ‘target’) by another.

• Accurate business valuation is one of the most important aspects of M&A as valuations like these will have a major impact on the price that a business will be sold for.

• Most often this information is expressed in a Letter of Opinion of Value (LOV) when the business is being valuated for interest's sake. There are other, more detailed ways of expressing the value of a business.

• These reports generally get more detailed and expensive as the size of a company increases.

Leveraged Buyout

• Acquisitions financed through debt are known as leveraged buyouts

• At present the majority of M&A advice is provided by full-service investment banks

Corporate Finance in Planning of Business Services

• These would involve financial planning, project appraisal etc

Corporate Finance in Generating Funds

• These refer to activities for raising funds for the company, - debt funding, IPOs etc.

What is Factoring

• Factoring is a financial transaction whereby a business sells its accounts receivable (i.e., invoices) to a third party (called a factor) at a discount in exchange for immediate money with which to finance continued business.

Factoring differs from a bank loan in three main ways.

• First, the emphasis is on the value of the receivables (essentially a financial asset), not the firm’s credit worthiness.

• Secondly, factoring is not a loan – it is the purchase of a financial asset (the receivable).

• Finally, a bank loan involves two parties whereas factoring involves three.

• The three parties directly involved are: the one who sells the receivable, the debtor, and the factor.

• The receivable is essentially a financial asset associated with the debtor’s liability to pay money owed to the seller (usually for work performed or goods sold).

• The seller then sells one or more of its invoices (the receivables) at a discount to the third party, the specialized financial organization (the factor), to obtain cash.

• The sale of the receivables essentially transfers ownership of the receivables to the factor, indicating the factor obtains all of the rights and risks associated with the receivables.

• Accordingly, the factor obtains the right to receive the payments made by the debtor for the invoice amount and must bear the loss if the debtor does not pay the invoice amount.

• Usually, the account debtor is notified of the sale of the receivable, and the factor bills the debtor and makes all collections.

• What are Corporate Advisory Services ? Describe some of the financial advisory services provided to corporates ?

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