Corporate finance and investment law
Corporate finance and investment are commonly the two sides of the same coin – the company structures its financing structure, and investors (or financiers) provide funds to the company in return for shares or other financial instrument.
There are many processes that companies use to finance their activities, but these generally relate to equity finance (such as shares in the company) or debt finance (such as a loan from a bank or private lender).
As noted above companies use these funding methods to finance their activities, and the sources of finance are commonly decided based on the cost and availability of funds. For example, it is generally understood that:
- A company without any financial history, or proof of a viable business model, will struggle to obtain bank finance, unless there is a guarantor to provide surety to the bank – in this scenario it is common for a company to obtain seed finance from the “three Fs” – the friends and family of, and fools known to, the owners and or directors of the company (fools being a reference to those who are willing to support a venture without evidence that they will ever obtain a return on that investment);
- A company with the assets, and expertise to make money, but with little or no earnings history will also struggle to obtain bank finance, but it may be possible if the managers have sufficient expertise, and a compelling business model, however, it is more likely that independently wealthy individuals, with an interest in the business may consider investing in a company at this stage of development, as the shares can be obtained at a discount (which reflects the risk of the venture) to the company’s valuation;
- Funding a company with investor funds is expensive compared to bank finance, but it makes sense when the company’s earnings are limited or subject to significant fluctuations, because generally investments do not require fixed repayments regardless of the company’s financial performance;
- Once a company has proved its financial capacity the directors combine equity investments and debt finance to (known as the debt equity ratio) to get the best outcomes for the company and its investors.
We help companies with all aspects of their finance requirements and work closely with the directors, CFO, CEO and other stakeholders to meet the company’s financial objectives.
We also assist investors to conduct due diligence, and negotiate terms of investment in companies of various sizes.