• Financial services refer to services provided
by the finance industry.
• The finance industry encompasses a broad
range of organizations that deal with the
management of money.
Among these organizations are
– credit card companies,
– insurance companies,
– consumer finance companies,
– stock brokerages,
– investment funds and
– some government sponsored enterprises.
• As of 2004, the financial services industry
represented 20% of the market capitalization
of the S&P 500 in the United States.
Corporate Advisory Services
• A business requires advisory services in a
number of domains.
• Some entities have multi disciplinary teams
that provide advisory services on issues that
cut across domains, while others specialize in
• Corporate finance advisory means the
advisory services that are provided to the
various corporate bodies about the financial
aspect of their operations.
• These services may be provided by the
advisory boards of the companies or by
professional bodies who deal in such services.
• The companies that provide advisory services
in the domain of corporate finance provide
services in the following fields:
– Corporate Finance in Solutions related to
Problems of Business Operations
– Corporate Finance in Mergers and Acquisitions
– Corporate Finance in Planning of Business Services
– Corporate Finance in Generating Funds
Corporate Finance in Solutions related to Problems of
• These are transactions based involved in the
• Examples could be tax and accounting as well
as Regulatory advisory
Corporate Finance in Mergers and Acquisitions
• Merger refers to the aspect of corporate
strategy, corporate finance and management
• dealing with the buying, selling and combining of
different companies that can aid, finance, or help
a growing company in a given industry grow
• without having to create another business entity.
• An acquisition, also known as a takeover or a
buyout, is the buying of one company (the
‘target’) by another.
• Accurate business valuation is one of the most
important aspects of M&A as valuations like
these will have a major impact on the price that a
business will be sold for.
• Most often this information is expressed in a
Letter of Opinion of Value (LOV) when the
business is being valuated for interest's sake.
There are other, more detailed ways of
expressing the value of a business.
• These reports generally get more detailed and
expensive as the size of a company increases.
• Acquisitions financed through debt are known
as leveraged buyouts
• At present the majority of M&A advice is
provided by full-service investment banks
Corporate Finance in Planning of Business
• These would involve financial planning,
project appraisal etc
Corporate Finance in Generating Funds
• These refer to activities for raising funds for
the company, - debt funding, IPOs etc.
What is Factoring
• Factoring is a financial transaction whereby a
business sells its accounts receivable (i.e.,
invoices) to a third party (called a factor) at a
discount in exchange for immediate money
with which to finance continued business.
Factoring differs from a bank loan in
three main ways.
• First, the emphasis is on the value of the
receivables (essentially a financial asset), not
the firm’s credit worthiness.
• Secondly, factoring is not a loan – it is the
purchase of a financial asset (the receivable).
• Finally, a bank loan involves two parties
whereas factoring involves three.
• The three parties directly involved are: the one
who sells the receivable, the debtor, and the
• The receivable is essentially a financial asset
associated with the debtor’s liability to pay
money owed to the seller (usually for work
performed or goods sold).
• The seller then sells one or more of its invoices
(the receivables) at a discount to the third party,
the specialized financial organization (the factor),
to obtain cash.
• The sale of the receivables essentially transfers
ownership of the receivables to the factor,
indicating the factor obtains all of the rights and
risks associated with the receivables.
• Accordingly, the factor obtains the right to
receive the payments made by the debtor for the
invoice amount and must bear the loss if the
debtor does not pay the invoice amount.
• Usually, the account debtor is notified of the sale
of the receivable, and the factor bills the debtor
and makes all collections.
• What are Corporate Advisory Services ?
Describe some of the financial advisory
services provided to corporates ?