What is a corporate finance advisor with David Jones
In this episode of Kybos Diary of a CFO, Stephen Hambling talks openly with guest David Jones about how organisations should prepare for mergers and acquisitions, emphasising the significance of effective financial forecasting and the role of a corporate finance advisor in the preparation process.
Involvement in a transaction places significant demands on the finance team, particularly the finance director. Beyond their core responsibilities, there is considerable additional workload. While it is often assumed that corporate finance advisors will handle the financial modelling, the drafting of information memorandums, and much of the detailed work, this is rarely the case. In practice, the responsibility typically remains with the internal team, who are expected to build the financial model and generate the forecasts. Advisors may provide some support, often at an incremental fee, but ultimately, the onus is on the team to deliver the core outputs.
It is critical that management, not the advisor, owns both the model and the forecasts. There can be a misconception that these artefacts belong to the advisor when, in fact, the integrity of the process requires that the management team is fully accountable. This ensures that, when questioned by diligence accountants regarding the assumptions underpinning the model, the management team can respond with authority and conviction. Reliance on advisors to construct the forecasts undermines credibility and is not acceptable practice.
Forecasts must be defensibly developed and owned by management. As you enter into a sale and purchase agreement (SPA), there will be specific requirements regarding the accuracy and origin of the information provided. While forecasts themselves may not be explicitly warranted, the process by which they are prepared will be subject to scrutiny, and management must ensure their integrity. It is a mistake to assume that forecasting can be delegated to advisors; robust preparation well in advance of the transaction is essential.
A strong forecasting process needs to be in place early, as forecasts are vital throughout the deal lifecycle. Engaging with advisors before a formal process begins can be extremely beneficial, providing valuable assessment of your forecasts’ suitability and flexibility. Many businesses now employ vendor diligence processes, where a team of accountants prepares a comprehensive diligence pack on behalf of the vendor, or use vendor assist services for transaction readiness. While these forms of support are available, early and thorough preparation by management often reduces the need to outsource significant aspects of the process.
Allowing 12 to 18 months for preparation enables a business to ensure that its data and forecasts are fully transaction-ready. This proactive approach gives management control over much of the preparatory work, which is often preferable and more cost-effective. However, it is not uncommon for businesses to underestimate the required timelines, deciding to go to market with inadequate preparation and finding themselves unready for due diligence.
Ultimately, readiness begins long before a formal process is underway. For any business that may attract interest from private equity, existing shareholders seeking further investment, or that is considering refinancing or a more complex debt arrangement, developing a well-structured set of forecasts is non-negotiable. Early, rigorous preparation is the foundation of successful transaction outcomes.
About David Jones
David is a seasoned mergers and acquisitions (M&A) expert who has successfully completed approximately 150 deals. He is also a former Deloitte LLP partner of 19 years, as well as a non-executive director and strategic advisor. David has an established history of advising on a wide variety of transactions in the lower mid-market. His expertise encompasses corporations, owner-managed businesses, and entities backed by private equity. As a reliable advisor with strong commercial insight and a broad network, David offers Boards strategic advice and guidance on essential issues such as exit readiness, business and succession planning, and risk and crisis management.
During his tenure at Deloitte, David significantly contributed to advancing the firm’s private sector healthcare initiatives in the UK. As an essential part of the Life Sciences & Healthcare Industry Executive, he was crucial in developing Deloitte’s pan-European and global Health M&A presence.
As a Fellow of the Institute of Chartered Accountants in Ireland (FCA) and a former Member of the Securities Institute, David’s dedication to excellence, client service, and team leadership is evident through his receipt of prestigious awards. He was named HealthInvestor Deal Maker of the Year for three consecutive years (2016, 2017, and 2018). Furthermore, his team consistently earned recognition for their exceptional work, winning the Corporate Finance Team of the Year award at both the LaingBuisson Awards and the HealthInvestor Awards. Connect with David on LinkedIn.
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