8 April 2019
As a corporate finance partner, I am always pitching to clients, sometimes informally, sometimes more formally. A valid question to be asked is; when clients ask corporate finance firms to formally pitch, colloquially referred to as a ‘beauty parade’, does it actually result in the client picking the right adviser, and a better transaction for them?
In my experience, the more formal the process of selecting a corporate finance adviser is, the worse the choice of adviser is, and the worse the outcome of the subsequent transaction. The reasons for this are that the open and honest exchange of information that might result from a series of conversations is greatly inhibited by the formality of a pitch. Once the expectation of a formal pitch is introduced into a conversation between the client and potential corporate finance adviser, the conversation dries up, and the adviser turns his focus and resources to the pitch. What works better, in my opinion, is a series of friendly conversations whereby the adviser understands the proposed transaction and the key motivations behind it, and is able to provide his thoughts on how the upcoming transaction should be refined, positioned and executed to meet those objectives.
So the message is; the best way to appoint advisers and extract the best value from them is to hold a series of informal conversations. Don’t talk to too many advisers, perhaps three at most, and appoint the firm with your lead adviser in mind. Do not forget this is the person that will be leading your deal, and this is the person who you need to trust to deliver the transaction for you. It helps to meet the complete team that will be working on your transaction and get to know them, either before a decision is made, or very soon after.