The role of corporate finance advisory and investment services has shifted in recent years. No longer simply about providing transactional support, these services are increasingly being conducted with the focus on strategic stewardship, writes Sydney Mhlarhi, founder of black-owned and managed investment, corporate finance advisory and fund management company, Tamela.
This is why firms that offer technical expertise combined with local context are increasingly in demand. In response to this need, a select group of South African boutique advisory firms have positioned themselves as long-term growth partners for businesses operating in the country and other jurisdictions.
Historically, corporate finance advisory in South Africa was focused on conducting discrete transactions: assisting with initial public offerings, securing debt funding, or advising on acquisitions, divestments, or BEE transactions. This approach, however, was found lacking, especially in a country where the regulatory environment and socio-political status quo have a significant impact on businesses.
Increasingly, clients are looking for advisors who understand the intricacies of their businesses as well as the local economy; and who can deliver insights and support over the long term. This means nurturing relationships, premised on trust and integrity, often walking the journey with clients over several years – creating symbiotic relationships and providing value beyond the transaction.
Along with trust, comes reputation: what is the firm’s reputation in the market; is it reliable, or does it have a proven track record? From an investor and investee perspective, are the people with fiduciary responsibilities visible and present, and do they offer exceptional local expertise and wisdom?
This is where the new breed of boutique corporate finance firms are becoming gamechangers. They are agile, independent and in touch with local trends and subtleties. No longer just intermediaries, they are entrenching themselves in their clients' businesses and advising on financial structuring as well as operations, housekeeping, and market positioning.
In some instances, they have become the mouthpiece for clients in situations that require third party impartiality, where responsiveness are an issue or local insights are necessary. Or they have taken a ‘hit’ for the client in volatile situations, something a traditional bank would not do. This is driven by client needs and requires strategic capability and maturity.
Where a shareholding is acquired in a company, long-term relationships – akin to a marriage between two consenting parties who expect to be together for a long time – are being formed. On the investment side, building relationships that can endure for a decade or more is crucial, allowing for future opportunities to be effectively harnessed.
Not only do the leaders of modern advisory firms secure clients and mandates, but they also remain involved in seeing the execution of those transactions through to the end.
As these boutique firms grow, attract a greater number of clients and employ more talent, the focus on relationships remains paramount. It requires a concerted effort to ensure senior people – with the right wherewithal – are equipped to take over some of those relationships or specific clusters of investments.
Additionally, being unencumbered by the balance sheet and not having to bank their clients means the advice they offer is more objective. For that reason, large operations looking to raise capital have at times enlisted boutique advisory firms to get an impartial view of competing funding proposals.
As South African businesses seek out world-class and locally astute guidance, the role of the corporate finance advisor will no doubt continue to evolve. No longer merely dealmakers, the leaders in this space are becoming trusted allies and stewards of growth and co-creation for local businesses.