Corporate advisory refers to the activity of advising organisations, including corporations, institutions and government bodies, on mergers and acquisitions and other transactions that involve a change in ownership of a company or business. In investment banking circles, this activity is commonly known by the general term M&A (Mergers and Acquisitions).

Transaction types include mergers, acquisitions, disposals, defences, spin-offs, demergers, joint ventures, privatisations, leveraged buyouts and many others. Transactions may be "public" transactions, where the target is a listed public company

Public company

This is not the same as a Government-owned corporation.A public company or publicly traded company is a limited liability company that offers its securities for sale to the general public, typically through a stock exchange, or through market makers operating in over the counter markets...

, or "private" transactions, where the target company is not listed.

There will normally be a minimum of two parties to an M&A transaction, namely the bidder and the target. In a sale transaction, there will also be a vendor, i.e. the seller of the target business.

Who is involved in advising on a M&A transaction?

In practice, there may be a significant number of advisers on any particular M&A transaction. On a large, public transaction, these include:

• Financial advisers, usually investment banks and/or specialist corporate advisory firms. Typically both the bidder and the target (or vendor, in a sale transaction) will retain at least one financial adviser. On larger or more complex transactions, it is common for several financial advisers to be retained by each party to the transaction. In the UK, the Takeover Code mandates the retention of an independent adviser by a target company and that the advice must be made known to shareholders

• Legal advisers, usually specialist corporate law advisers. External legal advisors are normally retained even when financial advisers are not used.
• Financiers, either investment banks and/or corporate banks, whose job is to arrange and/or provide the finance required for the bidder to complete the transaction.
• Independent experts, separate from the financial advisors to the bidder and target, are required in some markets such as Australia and New Zealand. Their role is to provide independent financial advice to the shareholders of the target company as to whether the transaction is in their best interests.
• Other advisers, including management consultants, accounting advisors, auditors and financial PR advisors.

What is the role of the M&A adviser?

The M&A adviser's precise role varies somewhat from market to market, but on an acquisition of a large listed company would typically comprise:

• advice on the overall approach to the transaction, including approach strategy and negotiating tactics;
• assistance with the assembly of an appropriate team of professional advisers;
• co-ordination of the advice received from other advisers;
• valuation, including, where appropriate or required by local legislation, a formal "fairness opinion
  Fairness opinion
  A fairness opinion is a professional evaluation by an investment bank or other third party as to whether the terms of a merger, acquisition, buyback, spin-off, or going private are fair...
  
  " on the financial terms of the transaction;
• assistance with the co-ordination of due diligence (but not the design or execution of the due diligence programme);
• advice on the optimal structure for the proposed transaction, which will in turn impact on how the transaction may best be financed;
• advice on proposed financing arrangements, working with the proposed finance provider or capital markets issuer;
• advice on likely market reaction to a proposed transaction, in conjunction with equity market specialists where appropriate (often referred to as corporate brokers);
• advice and assistance with design of investor communications, in conjunction with any external financial PR agency that has been appointed; and,
• oversight of the production of transaction documentation, in close co-operation with the client's legal advisers.

To perform these services in the US, an advisor must be a licensed broker dealer, and subject to SEC (FINRA) regulation. Other countries have similar regulatory schemes.

Who offers corporate advisory services?

Large public transactions (e.g. over US$1bn in value) represent the significant majority of M&A transactions by value globally. There are two main types of company that provide M&A advice on such transactions, namely global investment banks (including the investment banking divisions of major universal banks) and specialist corporate advisory businesses.

Investment banks seek to offer customers a "one stop shop" solution, providing not only M&A advice but also the ability to provide, or arrange, any equity or debt funding required to finance the transaction. The investment banking divisions of such companies are managed to leverage the investment bank's capabilities, with a focus on cross-sale of all relevant products that are available. These businesses also have many other activities, including equity and debt sales and trading, stock broking, market-making and principal trading. Global examples include Goldman Sachs

Goldman Sachs

The Goldman Sachs Group, Inc. is an American multinational bulge bracket investment banking and securities firm that engages in global investment banking, securities, investment management, and other financial services primarily with institutional clients...

, Morgan Stanley

Morgan Stanley

Morgan Stanley is a global financial services firm headquartered in New York City serving a diversified group of corporations, governments, financial institutions, and individuals. Morgan Stanley also operates in 36 countries around the world, with over 600 offices and a workforce of over 60,000....

, Citigroup

Citigroup

Citigroup Inc. or Citi is an American multinational financial services corporation headquartered in Manhattan, New York City, New York, United States. Citigroup was formed from one of the world's largest mergers in history by combining the banking giant Citicorp and financial conglomerate...

, JP Morgan, UBS, Deutsche Bank

Deutsche Bank

Deutsche Bank AG is a global financial service company with its headquarters in Frankfurt, Germany. It employs more than 100,000 people in over 70 countries, and has a large presence in Europe, the Americas, Asia Pacific and the emerging markets...

, HSBC

HSBC

HSBC Holdings plc is a global banking and financial services company headquartered in Canary Wharf, London, United Kingdom. it is the world's second-largest banking and financial services group and second-largest public company according to a composite measure by Forbes magazine...

, Bank of America

Bank of America

Bank of America Corporation, an American multinational banking and financial services corporation, is the second largest bank holding company in the United States by assets, and the fourth largest bank in the U.S. by market capitalization. The bank is headquartered in Charlotte, North Carolina...

, Barclays, Lazard

Lazard

Lazard Ltd is the parent company of Lazard Group LLC, a global, independent investment bank with approximately 2,300 employees in 42 cities across 27 countries throughout Europe, North America, Asia, Australia, Central and South America...

, Rothschild

N M Rothschild & Sons

N M Rothschild & Sons is a private investment banking company, belonging to the Rothschild family...

. In addition, a number of regionally based investment banks also exist, including Standard Chartered Bank

Standard Chartered Bank

Standard Chartered PLC is a multinational financial services company headquartered in London, United Kingdom with operations in more than seventy countries...

 (Africa, Asia and Middle East), Rand Merchant Bank (Africa,Asia,Europe), Macquarie

Macquarie Group

Macquarie Group Limited is a global investment banking and diversified financial services group, providing banking, financial, advisory, investment and funds management services to institutional, corporate and retail clients and counterparties around the world...

 (Australia), Société Générale

Société Générale

Société Générale S.A. is a large European Bank and a major Financial Services company that has a substantial global presence. Its registered office is on Boulevard Haussmann in the 9th arrondissement of Paris, while its head office is in the Tours Société Générale in the business district of La...

, BNP Paribas

BNP Paribas

BNP Paribas S.A. is a global banking group, headquartered in Paris, with its second global headquarters in London. In October 2010 BNP Paribas was ranked by Bloomberg and Forbes as the largest bank and largest company in the world by assets with over $3.1 trillion. It was formed through the merger...

 and Calyon

Calyon

Crédit Agricole Corporate and Investment Bank is Crédit Agricole's corporate and investment banking entity. With a staff of 13,000 employees in 58 countries, Crédit Agricole CIB is active in a broad range of capital markets, investment banking and financing activities...

 (France), Metzler

Metzler Bank

The B. Metzler seel. Sohn & Co. KGaA is a private banking company in Frankfurt, Germany. Metzler traces its origins to a trading company established 1674 by Benjamin Metzler in Frankfurt and is Germany’s oldest private bank still owned exclusively by the founding family.Metzler provides financial...

 (Germany), Mediobanca

Mediobanca

Mediobanca is an Italian investment bank founded in 1946 at the initiative of Raffaele Mattioli and Enrico Cuccia to facilitate the post-World War II reconstruction of Italian industry.Enrico Cuccia led Mediobanca from 1946 to 1982...

 (Italy), Nomura

Nomura

Nomura Nomura Nomura (野村 (field village), 埜村 (wilderness field) is a Japanese surname. It can refer to:-Finance:*Nomura Holdings, part of the Nomura Group (also including Nomura Securities Co.)-People:*Don Nomura (born 1957), Japanese-American baseball agent...

 (Japan), Daewoo Securities

Daewoo Securities

Daewoo Securities is the largest stock brokerage and investment banking firm by market capitalization in Korea. The company has been a subsidiary of KDB Financial Group since the early 2000s. Its name orginates from the large Daewoo Conglomerate of Korea to which it originally belonged to.Daewoo...

 (South Korea), ABN Amro

ABN AMRO

ABN AMRO Bank N.V. is a Dutch state-owned bank with headquarters in Amsterdam. It was re-established, in its current form, in 2009 following the acquisition and break up of ABN AMRO Group by a banking consortium consisting of Royal Bank of Scotland Group, Santander and Fortis...

, Moelis & Company

Moelis & Company

Moelis & Company is a global investment banking and merchant banking firm. The firm provides advisory services related to mergers & acquisitions, recapitalization & restructuring, capital markets advisory and risk advisory...

, HDL Capital (Toronto), Portico Capital, and William Blair

William Blair & Company

William Blair & Company is privately held employee-owned financial services firm that provides investment banking, equity research, brokerage, asset management and private capital services.William Blair & Company, L.L.C. was founded in 1935...

 (United States), Corporate Professional(India), NKS & Company, Company Secretaries(India).

In contrast, specialist corporate advisory firms offer solely M&A advice. These businesses have emerged in part as a response to the conflicts of interest that are inherent in the full service investment bank model, where an investment bank may simultaneously:

• advise a corporate client on a transaction
• provide or raise financing to support the transaction (either on its own balance sheet or by sourcing capital from clients of the bank)
• trade in the shares of both the bidder and the target
• offer equity research on both the bidder and the target
• provide prime brokerage to hedge funds and other investors wishing to trade in the shares of the bidder or the target
• make a market in the shares of the bidder or the target or otherwise invest its capital in trading positions that may be impacted by the transaction.

Typically corporate advisory firms are run by senior M&A bankers with substantial amounts of transaction experience. Given the exclusive focus on M&A advice, their principal day to day relationships are typically with the Boards, CEOs and CFOs of the companies in question. As a result, it is natural for such firms to seek and earn the role of most trusted adviser to the companies in question.

Corporate advisory firms may be retained as sole adviser on transactions. Alternatively, particularly where a significant capital raising may be required as part of the transaction, or where a broader advisory team is desired, they may be hired as co-advisers with a global investment bank or other advisory firm.

Who are the major corporate advisory firms?

Over the last twenty years, a small number of specialist corporate advisory businesses have emerged in most major developed markets and over time, the market share of such businesses has grown. Multinational examples include Greenhill

Greenhill & Co.

Greenhill & Co., Inc. is a leading independent investment bank focused on providing financial advice on significant mergers, acquisitions, restructurings, financings and capital raisings to corporations, partnerships, institutions and governments. The firm made $298.6m in sales in 2009, with a...

, Evercore

Evercore Partners

Evercore Partners is an investment bank located in New York City. Evercore also has an investment management business through which the Company manages private equity and venture capital funds for institutional investors...

, Perella Weinberg Partners

Perella Weinberg Partners

Perella Weinberg Partners L.P. is an independent, privately owned, global financial services firm providing corporate advisory and asset management services to clients around the world. Launched in 2006 by Joseph R. Perella, Peter Weinberg, Terry Meguid and several other partners from prominent...

 and Centerview Partners

Centerview Partners

Centerview Partners is an independent investment banking and private equity investment firm. Centerview operates primarily as an investment banking advisory firm. The firm offers mergers and acquisitions advisory, takeover defense, capital allocation and divestitures services. The firm also...

, and national examples include Baron Partners

Baron Partners

Baron Partners is an Australian corporate advisory firm, with offices in Sydney and Adelaide.Established in 1987, the firm is recognised as one of the top independent corporate advisors in Australia....

 and Pottinger

Pottinger (Australia)

Pottinger is a strategic and corporate advisory firm, which provides:* Assistance with the development of strategy* Advice on mergers and acquisitions and similar transactions* Advice on capital optimisation, financial structuring and capital raising...

 (Australia), Arjil (France), Gleacher Shacklock(UK) and Stonepine Advisors, LLC (US). Historic examples include Wasserstein Perella (or Wasserella), which was acquired by Kleinwort Benson

Kleinwort Benson

Kleinwort Benson is a leading Private Bank that offers a wide range of financial services to private and corporate clients from offices throughout the United Kingdom and Channel Islands. The bank has its headquarters on St George Street in Mayfair, and is supported by seven UK regional and two...

 in 2001. One of its founders, Bruce Wasserstein

Bruce Wasserstein

Bruce Jay Wasserstein was an American investment banker and businessman. He was a graduate of the McBurney School, University of Michigan, Harvard Business School, and Harvard Law School, and spent a year at Cambridge University...

, was CEO of Lazard

Lazard

Lazard Ltd is the parent company of Lazard Group LLC, a global, independent investment bank with approximately 2,300 employees in 42 cities across 27 countries throughout Europe, North America, Asia, Australia, Central and South America...

 until his death on October 14, 2009. He was succeeded by Kenneth Jacobs.

What happened to the merchant banks?

Historically, the corporate advisory sector in Europe was dominated by the so-called merchant banks, which included Lazard

Lazard

Lazard Ltd is the parent company of Lazard Group LLC, a global, independent investment bank with approximately 2,300 employees in 42 cities across 27 countries throughout Europe, North America, Asia, Australia, Central and South America...

, Barings, Warburg

Warburg

Warburg is a town in eastern North Rhine-Westphalia on the river Diemel near the three-state point shared by Hessen, Lower Saxony and North Rhine-Westphalia. It is in Höxter district and Detmold region...

, Kleinwort Benson

Kleinwort Benson

Kleinwort Benson is a leading Private Bank that offers a wide range of financial services to private and corporate clients from offices throughout the United Kingdom and Channel Islands. The bank has its headquarters on St George Street in Mayfair, and is supported by seven UK regional and two...

, Schroders

Schroders

Schroders plc is a British multinational asset management company with over 200 years of experience in the world's financial markets. The company employs 2,905 people worldwide who are operating from 32 offices in 25 different countries around Europe, America, Asia and the Middle East...

 and Rothschild

Rothschild

Rothschild is a common German surname. It is a habitational name from a house distinguished with a red shield , the earliest recorded example dating from the 13th century...

. Most of these have subsequently been acquired, including Barings (by ING

ING Group

The ING Group is a global financial institution offering retail banking, direct banking, commercial banking, investment banking, asset management, and insurance services. ING is the Dutch member of the Inter-Alpha Group of Banks, a cooperative consortium of 11 prominent European banks...

), S.G. Warburg (by UBS), Dresdner Kleinwort Benson

Kleinwort Benson

Kleinwort Benson is a leading Private Bank that offers a wide range of financial services to private and corporate clients from offices throughout the United Kingdom and Channel Islands. The bank has its headquarters on St George Street in Mayfair, and is supported by seven UK regional and two...

 (by Dresdner Bank and subsequently by Allianz

Allianz

SE is a global financial services company headquartered in Munich, Germany. Its core business and focus is insurance. As of 2010, it was the world's 12th-largest financial services group and 23rd-largest company according to a composite measure by Forbes magazine.Its Allianz Global Investors...

) and Schroders (by Citigroup). The remaining two, Lazard

Lazard

Lazard Ltd is the parent company of Lazard Group LLC, a global, independent investment bank with approximately 2,300 employees in 42 cities across 27 countries throughout Europe, North America, Asia, Australia, Central and South America...

 and Rothschild

Rothschild

Rothschild is a common German surname. It is a habitational name from a house distinguished with a red shield , the earliest recorded example dating from the 13th century...

 continue to provide corporate advisory services, as part of a wider service offering which also includes significant funds management and private banking operations. Historically merchant banks provided trade finance in the form of debt capital to merchants from their own balance sheet. Investment banks provided capital by intermediating between sources of capital and clients requiring funds. Over time the distinction blurred, as merchant banks accessed capital markets and investment banks begun investing their own capital (shareholders funds) as a principal in many transactions.

The impact of the global financial crisis

There has been significant restructuring of the investment banking industry as a result of the global financial crisis, with long established firms such as Bear Sterns, Lehman and Merrill Lynch either failing or being rescued by universal banks. Meanwhile the capital strength of leading universal banks has been greatly reduced. Against this background, the trend of major corporates and Governments increasingly turning to independent advisory businesses for advice has continued.

Accounting firms

The corporate advisory divisions of the larger audit firms have established a significant presence in advising on smaller, private transactions, but have a minimal presence in advice on public transactions.
In addition, there is a large number of other companies that offer some form of corporate advisory service, but increasing regulation in many markets has restricted the scope of activities of such companies.

See also

• M&A
• Investment bank
• Universal bank
  Universal bank
  A universal bank participates in many kinds of banking activities and is both a commercial bank and an investment bank.The concept is most relevant in the United Kingdom and the United States, where historically there was a distinction drawn between pure investment banks and commercial banks. In...