The right advisory team makes the difference

PRUDENTIAL’S clumsy attempts to raise $21bn (£14.3bn) to part-finance a planned acquisition of Asian insurer AIA have lurched from one embarrassing stumbling block to another. But could the process have gone more smoothly if a different mix of advisers had been assembled?

Any business thinking about selling a company, buying a competitor or raising capital needs to assemble a deal team with the right blend of talent and experience.

American advisory expert Kenneth H Marks reckons the right team is the only way to ensure the best value is achieved and ensure the transaction actually completes in the first place.

Number one on his list of critical team members is the legal counsel, who should be experienced with transaction structuring and securities law and is someone whose judgement can be trusted. Above all they need to be what Marks calls a “deal doer” rather than a “deal killer”, as well as being able to think creatively.

Second, most important are the investment bankers – M&A specialist if you are selling your business. These intermediaries drive the transaction process, help present and market the company and may participate in negotiating the deal. Marks says the key here is to have a partner-level professional with transaction and business experience that understands the entire process, the subtleties, and the inter-related issues and opportunities.

Accountants are next on the list and normally more than one. Financial statements must comply with generally accepted accounting principles. As valuations tend to boil down to a multiple of EBITDA (earnings before interest taxes depreciation and amortisation) or cash flow, the audit accountant ensures the solid earnings information likely be required in negotiating the deal. Tax accountants – particularly during a company sale – make decisions that can hit the eventual after-tax cash proceeds to shareholders.

Board members and management come next – surprisingly low down Marks’ list of priorities but integral nonetheless. Those internal players chosen for the deal team must understand the intricacies of the business and its industry, and represent the interest of the shareholders and key stakeholders. These personalities could be critical for many investors and buyers. Having senior team members on board early in the process is usually key to successfully presenting and marketing a company.

Marks advises the team is carefully selected to ensure they have the focus, expertise, network, and mind to enable sure-footed, solid decisions during the financing or M&A process. The mix of these professionals and their firms is a function of the credibility of a company’s management, its size, stage and industry and the realistic growth opportunity.

With this sage advice in mind, not to mention a bit of luck, deals and fundraisings stand a better chance of passing off successfully.