What Is a Corporate Finance Advisory?

When corporate executives are considering a major financial event, these professionals typically do not go it alone. Investment banks offer corporate finance advisory services to assist with major transactions in the capital markets. Some of these advisory services may be tied to mergers and acquisitions, capital raising, or launching a new company into the publicly traded markets in an initial public offering (IPO). Bankers who provide corporate finance advisory services often earn fees based on the size of the deals being performed. It's possible for a financial firm to specialize in providing advice in an advisory role or to have a greater depth of services not limited to advisory.

A company that is looking to expand through a merger or acquisition will often engage the services of a corporate advisory firm. These individuals, who are often investment banking professionals, can help with domestic and international deals. Upon learning the goals and resources of a client, an advisory firm may help to locate acquisition targets and can begin negotiation processes. Corporate advisory services include providing valuations on assets or businesses so that a company can determine the best price to pay for an acquisition. Financial services also extend to deciphering the best way to finance a deal, including whether to use cash, stock, or debt, for instance.

The bankers providing corporate finance advisory services may be assigned to a particular industry, such as retail or technology, or a given segment of the markets, including debt or equity capital markets. Fees earned by the bankers are often a percentage of the total value of the deal. These expenses are also determined by the number of corporate finance advisory firms that are engaged for a particular transaction. Often, a company will hire more than one investment bank or advisory firm depending on factors such as the size of a deal.

When corporate finance advisory is being used in the equity markets for an event such as an IPO, investment bankers are expected to provide advice on the value of the deal. These professionals must provide services including determining the best price for a new stock that is entering the markets and the total number of shares that should reasonably be sold to investors. In an acceptable interest rate environment in the economy, a company might decide to issue bonds, or debt, into the markets. Corporate finance advisory services include issuing debt in the public or private markets and assigning the terms for the repayment of those bonds.