What Is Corporate Advisory?

Business and company valuations

If a business is closely-held (as per the ASIC definition), it may not be easy to determine its independent value if the founders, their relationships, and their intellectual property were no longer involved in the business. Yet it may become necessary for a variety of reasons, such as an impending merger, acquisition, sale, or purchase, estate or gift tax requirements, buy/sell agreements, litigation, or estate planning.  An objective, professionally prepared business valuation can offer timely answers to critical questions that face current or intending owners of businesses, companies or particular divisions, or even specific intellectual property such as patents.

When a business is placed on the market for sale, the selling price is usually set by the owners.   However, vendors can arrive at the sale price in any number of ways. It might be based on the previous purchase price, the original investment, or by comparing with the value of other businesses on the market. However, the selling price does not always reflect an accurate value of a business and prospective business purchasers should always conduct an independent valuation. It is important for a vendor to have a reasonable idea of what their business is actually worth before going to market.

Advivo Business Advisors and Accountants use a systematic process to value businesses, companies or a particular division as of a specific date and provide you with a valuation report that fits your requirements. Valuation engagements range from informal to very formal, depending on the purpose of the valuation and its intended use.

When providing this service, we will:

• Identify the purpose of your valuation and users of the report,
• Gather and research data,
• Analyse financial, risk, and economic factors,
• Prepare, review, and modify detailed financial forecasts,
• Apply appropriate valuation methods,
• Determine values resulting from the different valuation methods used; and
• Prepare a full valuation report, including financial and economic analysis, an explanation of our valuation methodologies, and a value estimate of your company or business.

All valuations are prepared on a fully independent basis. Depending on the purpose, we often also prepare a due diligence folder for potential users of the report to verify all facts and assumptions and to save costs and time for a potential sales process.

If you would like to obtain a quote or order your valuation, please download and complete this Valuation Order Form.

Intellectual property valuations

In terms of intellectual property (IP) valuation, Advivo provides a financial analysis to identify the value of specific IP assets of a business, such as patents etc.

It’s important to understand what makes your IP valuable, which also helps to determine how to go about maximising that value. To effectively value your IP, you will first have to conduct an audit of the IP to ascertain exactly what it is, verify absolute ownership, and confirm whether it can operate independently as an income-producing asset separated from the current people or structure.

The value of IP such as patents, trademarks, brands, databases, and trade secrets, can be valued using a number of methodologies. This is why you need an expert to do these specialised valuations. Registered patents and designs prevent competitors from launching similar or competing products, and potentially pushing the business aside within the market. Some of these specific assets are also limited by time due to their term.

If you would like to obtain a quote or order your valuation, please download and complete this Valuation Order Form.

Merger and acquisition advice

Merger and acquisition advice relies on a number of aspects and skills. Sound knowledge of what makes businesses and markets tick as well as the risks they face, coupled with accounting, legal and corporate finance skills, is essential to giving accurate and thorough advice. This process also requires a number of components, including valuations, due diligence investigations, financial forecasting, drafting sale documents, negotiating transaction terms, and briefing lawyers.

Many people believe that selling a business is easier than buying and that the buyer will be doing all the work. However, this is a common misconception and, unless you are prepared, you may lose the best prospect to buy your business. You need to have a clear understanding of the value you want and any terms associated with the sale of your business, company, or IP. Given this, you will need to conduct a due diligence investigation on your business and prepare a full due diligence database for potential purchasers that anticipate any questions they might ask and answer them in advance.

Most importantly, this database needs to include financial reporting and forecasts based on ideally a 3-year history with financial reporting that has little to no adjustments required and is completely clear of any personal items in both the balance sheet and profit and loss statement. For this reason, preparing for a sale can sometimes take more than a year to get right, and if you don’t want to drag it out longer, your best bet is to have independent experts like Advivo helping you along the way.

Due diligence

Essentially, due diligence refers to the care a reasonable person should take before entering into an agreement or transaction with another party. Due diligence consists of an investigation or audit of a potential investment, operating on behalf of the purchasers. This audit is not just limited to a financial investigation, but also includes risk analysis, process integrity and scalability, personnel, resources, legislative, and intellectual property, all of which could impact on future income sustainability of such investment.

Final offers to purchase an asset are usually made dependent upon the results of the due diligence analysis. This requires reviewing all financial records plus anything else deemed material to the sale and future income capacity of the business or asset, which also entails ensuring the correct amount is being paid and that an appropriate return on investment will be achieved, including allowing for debt servicing if applicable.

Sellers could also perform a due diligence investigation on the buyer, which considers their ability to purchase, and other factors that could affect the purchased entity or the seller after the sale has been completed. Due diligence is, therefore, a way of preventing unnecessary harm to either party or the entity involved in a transaction

Due diligence assesses the risks and opportunities of a proposed transaction.  It helps to reduce the risk of post-transaction unpleasant surprises. It is vital that the results of any due diligence process are relevant to the transaction including:

• Valuation of the target and therefore the purchase price,
• Sale and purchase agreement (e.g., accounting definitions, accounting and tax warranties and indemnities, etc),
• Integration plan (e.g., deal synergies); and,
• Return on Investment

Aside from sale preparation, there is a range of circumstances in which companies can benefit from an external due diligence investigation, such as:

• Where any organisation is considering an acquisition, merger, or joint venture.
• Where the organisation or deal manager has limited experience in undertaking due diligence.
• Where existing advisors face a conflict of interest or are not well placed to undertake the necessary due diligence.
• Where the required due diligence demands technical capabilities and commercial experience beyond the organisation’s internal resources.

At Advivo, we provide due diligence services in relation to:

1. Property investment transactions; and
2. Business or company investments.

Advivo’s due diligence audits cover financial considerations (e.g., the integrity of historic and forecast information), tax, commercial factors (e.g., customers, suppliers, markets, competitors), superannuation, human and other resources, risk identification, and mitigation. This includes:

• Appraising available information about the target [business or property] and the proposed merged entity to evaluate the merits of the deal and the valuation supporting the offer price more objectively,
• Identifying issues likely to affect negotiations and future operations; and,
• Helping to reduce the risks associated with the deal by identifying and quantifying risks and benefits (e.g., identifying suitable warranties and indemnities for inclusion in the sale and purchase agreement).

Project costing and feasibility

One of the best ways to determine if a potential venture is financially feasible is to conduct an independent analysis of the expected financial results.  Advivo’s feasibility studies will help you address a number of investment, business start-up, or expansion opportunities. These can include the feasibility of new entities, acquisition of an existing business, an investment in another business, the introduction of a new product, or expansion of plant capacity.

Our financial feasibility studies typically involve a market study including a demand analysis to help determine and support assumptions regarding anticipated revenues.  This helps company management decide whether or not to commit additional resources and/or borrow funds to finance a venture. Ultimately, you want to be confident you will receive an appropriate return on your investment for the risk and effort involved.

Although we tailor our studies to meet your unique needs, each study follows the same basic format.

For the market study or demand analysis portion, we:

• Conduct or commission market research to identify consumer or buyer attitudes and preferences,
• Define and describe the market,
• Document the competitive situation; and,
• Determine likely market potential and demand.

For the financial feasibility portion, we consider:

• Facility, construction, and resourcing costs,
• Financing and capitalisation,
• Personnel requirements,
• Revenue and operating expense analysis; and,
• Cash flow and debt capacity.

All of the above is underpinned by an extensive risk analysis of the proposed project.

 

We want to help you with your business. See our Corporate Advisory Services here.

Capital and debt restructuring

Capital raising often includes equity raising, of which reviewing your existing corporate structure, agreements and debt structures are key starting points. Pricing and structuring terms can be extremely complex and involve other skills including valuation. It is important to ensure total transparency and that the transaction is fair and equitable for all.

We use a range of business analytics tools that help us understand your business’ debt and capital structure need, whether you require assistance raising finance to support a growth strategy or need help refinancing existing debt covenants.

Advivo has extensive experience in capital raising and preparing legally compliant capital raising documents. A thorough understanding of the corporation’s activities and various options is essential to avoid heavy fines for non-compliance and possibly having to return all funds if done incorrectly.

Capital raising documents are complex and involved and rely on a thorough understanding of the business as well as the markets it operates in. To ensure a successful capital raising, detailed financial forecasts, a valuation, and full disclosure are essential.

Succession planning

After spending a lifetime building and growing a business, often the owners are deeply attached to it. Making the decision to sell that business can be very difficult and emotional. Advivo understands this and makes the transition planning as painless as possible.

One key–but often overlooked–aspect is making sure that the exiting party has thought through what they want to do next and has established a meaningful plan for their life after exiting their business. This ensures that there will not be remorse or barriers to negotiating a sale or exit when the time comes.

A good transition plan will allow a business to smoothly transition to a new owner, or next generation, including identifying who the future owner may be, whether it be family, key staff, other market participants or as yet unidentified opportunities. More importantly, by planning an owner’s exit early and constructing a staged exit plan, we maximise the value of a business and use it to meet future needs.

In this respect, transition planning is a lifesaver. We also ensure that needs are met post-retirement, preparing the business for sale or transition, and addressing any concerns regarding any impending changes to the business.

Estate planning

Whilst lawyers are responsible for document wills and other estate planning documentation, it is generally your accountant who truly understands your business structure, the value of your business assets, your financial and possibly personal objectives, and any other aspects involved in your business life.

Many of the skills and services detailed above may be required for an effective estate plan for business owners. Advivo works with you and your lawyers to develop a plan and assist with documenting and implementing, therefore ensuring that, when the time comes, your assets actually go where you want them to. With a thorough understanding of the complexities of your business and structures, Advivo works with you so you can avoid the costly legal challenges and angst that you would otherwise be burdened with if not done correctly.

Why work with Advivo?

Advivo’s Corporate Advisory division is made up of highly trained and skilled staff with years of experience, undertaking specific assignments designed to assist the needs of your business or corporation. Our specialist team also has extensive financial management skills which are integrated into the Corporate Advisory service, allowing our team to incisively interpret and communicate financial and other information, to achieve the desired outcomes.

Over the years, Advivo has provided Boards, CEOs, and senior management with hands-on support to assist their businesses with specific projects, all of which have made significant differences in the size and performance of their businesses. Let us take your business to the next level!