Independent Spirit: Corporate Finance Advisory Firms

In the U.K. M&A activities hit £375 billion in 2017 (ICAEW Issue 205 Sep 2018).  The main areas were in IPOs, growth-capital deals, debt advising and transaction services.  All generating fees.  The dense number of corporate finance advisers in the U.K. – ranging from investment and large professional services firms to mid-sized or small independent boutiques – means the landscape is competitive.

Larger firms have always tended to move up the spectrum of deal sizes, leaving smaller independent firms to fill.  Differentiation and USP are vital for independent boutiques to win mandates.  This may mean single or multi-sector focus, international reach through affiliations or international M&A networks, personalized and tailored services and flexibility in fee structures.  To get on well with business owners and understand client needs requires a personal touch.  With every changing markets, refreshed product range and services are essential.

In Malaysia, the total M&A deal in 2017 was RM82.8 billion (Read more here).  There are 65 licensed Corporate Finance Advisory firms.  Of this, 25 are independent boutiques.  The investment banks and the Big Four are principally involved in large ticket deals.  But the independents as agile as they are perhaps find constrained by rules and regulations of the last century.  Submission for any transaction must come through from investment banks or principal advisers (Read more here).  Independent, boutique advisors play a limited role in bond exercises or other due diligence work but submissions to authorities always invariably require another licensed intermediary, which then, leaves clients with why bother with independent advisors?

Independent advisors hope for a level “playing field”; and, if an advisor is not sufficiently equipped or manned then the authorities will assist in training to a level that is deemed acceptable.  In addition, boutique advisors (with 6 or less licensed rep.) are grouped voluntarily into 3 – 5 independent firms for purposes of marketing, branding and gathering of expertise for submissions.  Rules are then amended to reflect a more competitive landscape, although “big-ticket” items will still go to the large investment banks, and that is acceptable since the depth and scope for a transaction lies with them.  The authorities would do well to gather feedback for improvements to a system that has been in place for a very long time.