Corporate finance is the collective term for all activities focused on the strategy, organization and financing of a company.
Corporate finance, literally corporate finance in Dutch, is a term focused on business strategy, business organization and business financing. In short, all decisions that affect the short or long term of business operations.
Corporate finance is often concerned with maximizing shareholder value through short- and long-term financial planning and implementing various strategies. Corporate finance activities range from raising capital to improving returns and from restructuring to making strategic acquisitions.
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Thus, corporate finance covers various disciplines. We roughly divide them into three areas:
1. Mergers and acquisitions
Mergers and acquisitions is a form of corporate strategy.
Management buy-in: in a management buy-in (MBI), an unknown individual from outside the business takes over from the current owner. In recent years, a new group has emerged within MBIs: former entrepreneurs who have successfully sold a business. Often these are relatively young entrepreneurs who put their businesses on display after a few good years, such as during the Internet boom. But after a rest, the entrepreneurial blood plays up again and they buy a business, to feel the excitement of entrepreneurship again.
Management buy-out: in a management buy-out (MBO), the selling entrepreneur transfers his business to one or more employees within the company. This often involves the second-in-command, a manager in charge of a division of the company or the current management team (the second echelon).
Strategic takeover: in a strategic takeover, the entrepreneur sells his business to another company. This can be a direct competitor, a strategic party or a financial party (investment company).
2. Financing
Arranging financing is part of corporate finance. You can think of attracting, among other things:
- Refinancing
- Growth Finance
- Venture capital
- Private equity
- Bank financing
- Asset based financing
3. Restructuring
Restructuring of a business falls under corporate finance. Restructuring involves major changes in the financial, organizational and/or operational structure of a business. This name has a negative association, but restructuring can also have to do with the rapid growth of a business.
Restructuring is never a goal in itself. It is often carried out in the context of making the company future-proof(er).
Restructuring can also take place in the context of a crisis situation. Has the business run into financial difficulties, is it writing red figures and is there an increasing number of creditors on its doorstep? If so, a restructuring must take place in which, for example, one or more activities are scrapped, sold or significantly reduced in volume (which may involve mass layoffs of employees).
Corporate finance adviser
As an entrepreneur, you do not have to carry out all the activities related to corporate finance yourself. There are consulting firms and advisers in the field of corporate finance who assist SME entrepreneurs with these diverse aspects of business operations within a business.
