Understanding Corporate Finance

A guest post by Lianna Johnas

Corporate finance is the practice of maximizing shareholder value.  However, this is much more complex than its definition would imply. 

What Determines Value?

The main complicating factor is that most value is speculation.  Even money is only valuable because people expect to be able to use it to buy things in the future.  Similarly, most of the value of shares is speculative.

Because of this, everything your company does and says and everyone you hire affects corporate finance as a whole.  While in the common usage corporate finance just means mergers, acquisitions, and strategies, in real life it also means everything that is SAID about your mergers, acquisitions, and strategies.

What Corporate Finance Professionals Do

Corporate finance teams employ all sorts of professionals.  These can include media experts, stock market analysts, lawyers, business planners, negotiators and overall strategists.  Every large financial move must be meticulously planned to carry out its news releases, negotiation process, legal framework and handover structures so that all efforts would bring in the best possible outcome for the shareholders.  

Because of this, corporate finance is much more about personal skills than about overall strategies.  Business executives might have great ideas for their companies, but they need professionals in various disciplines with decades of experience to really get the best value for their shareholders.  

How to Assemble a Pro Corporate Finance Team

Getting all the skills needed to manage corporate finance can take decades. It is also an ongoing process.  As the market changes, so do the applicable skills.  As a result, only the most massive companies in the world (think Coca-Cola and HSBC) do all their corporate finance in-house.

Some companies try to cobble together corporate finance teams out of their existing consultants when they need to perform big transactions like mergers.  For example, they may try to ask their normal lawyers to come up with legal frameworks, while hiring market analysts to schedule press releases.

This rarely works out for the best. Communication between different consultants is difficult and fraught with conflicts of interest. Without experience, assembling corporate finance teams, executives might neglect to look for certain skills. In addition, teams made up of different consultants will rarely have the global reach necessary for multinational corporate finance.

In short, it is rare for a company to build a strong corporate finance team that will be as good as possible.  When it comes to shareholder value, you need everything to be as good as possible.

How to Hire a Team

Many corporate finance consultants offer full corporate finance teams as part of their services.  The general rule with this is that the larger the firm, the better their corporate finance team.  Large firms like KPMG have thousands of finance professionals on staff, so they can assemble a team that meets any company’s exact needs.

A good way to find a finance team is to check the rankings of Thomson Financial Securities Data.  A few companies have consistently ranked in the top five of corporate finance consultants, and these should be your first choice for your finance team. 

To get full detail on this article, visit  kpmg Corporate Finance page

Author bio:

Lianna Johnas is a Corporate Finance Analyst with specific interest in successfully managing a team of finance professionals in a corporate environment. She usually writes about latest trends in business advisory services and financial modeling. You can check her out at kpmg.com

image credit: dreamstime