There are many reasons that technopreneurs may take on a transaction advisor, but most often it is for their rolodex of contacts, or to outsource the M&A/capital raising process so that they concentrate on their core business. In this somewhat personal article, we discuss some of the softer but more powerful value that an advisor can bring, based on our own experience.

In our article blog article: Do I actually need a transaction advisor? (March 2018) we describe how an advisor adds value to a transaction for a client. In summary, a good transaction advisor should provide the following:

1. Independence (representing the best interests of the company itself)
2. Industry knowledge
3. Valuation
4. Strategic positioning
5. Negotiation
6. Creating competition
7. Risk identification and mitigation
8. Due diligence

At Corniche we have put industry knowledge front and centre of our efforts to be relevant to our clients. Each day we speak to a number of people in our industries and this (together with plenty of reading) enables us to keep up with trends and who is who. Our industries (Fintech, Telecoms and IoT) are very complex and I for one will admit that I am sometimes perplexed by certain industry structures, even when I understand them. History is often the answer and if you weren’t there… you’ll never know.

Good strategic positioning of a potential M&A/capital raising deal is as a result of strategic industry knowledge. If one can apply one’s mind to why one company would be interested in buying or investing another, the results can be stand out.

And it does help to know whether someone has money and appetite or not. It always amazes me how many deals fall over at the death because of funding – that is the investor does not actually have the money available for that particular investment or did not have the strategic rationale to persuade the board. This is a core skill of a good advisor; being able to ensure that there is funding and the investment making decisions are clear.

Valuation is an interesting topic – go to your accountant with a forecast series of cash flows and she can develop a scientific approach with a discounted cash flow to justify just about any value you wish. At least the discount rate will be weighted properly (WACC!), so it will look robust J. But valuations are most often about comparatives in the market and this is what makes databases such as PitchBook, CrunchBase and others so powerful – and worth the thousands of dollars that one pays.

Trying to manage expectations around value is usually one of the hardest parts of a mandate – win it and then discover that your start up founder without a minimum viable product thinks his business is worth $35 million… because there is history showing that some companies have achieved this. But what you don’t know is the debate at Google, for instance, at the time when it was worth $1million (it was!). Another difficulty is that value is often too closely tied to founder ego.

And of course we have to mention the tasks that many companies think the advisor is for – due diligence and a rolodex! Every mandate that we take on starts with a search for targets, regardless if we think we know the industry. There are always new players or different players depending on the strategic positioning.

Contacts can help to find new ideas – but only if you actually speak to them instead of spraying the ether with emails hoping to hit lucky. We put enormous store in our friends – they aren’t just contacts, we would like to think that they are long term partners and in due course, friends. Anyone can take my rolodex and have a go at using it but its not the names and contact details but the relationship with the person that is of any use.

The fee paid to advisors is for an end to end project. It starts when you begin to think about M&A or funding right through to signing the agreements and payment. The advisor becomes your sounding board, your white board, and your drinking partner (for those that imbibe). There are many times during a transaction when no one is the technopreneur’s friend – but the advisor is, and not only for the fees – in our case for the satisfaction of helping the technopreneur achieve his/her goals, and for the fun!