Lifting the lid on the big 4 corporate finance teams – valuations

Navigating the various teams under the “Corporate Finance” (AKA Deals, Deals Advisory or Transaction Advisory) umbrella within Big 4 Chartered Accounting firms can be challenging.

Knowing what each of these teams can and can’t offer you in terms of your future Corporate Finance career and professional skills development might be the difference between securing your dream job or being overlooked time and time again.

In the third of a series of articles focusing on the various “Corporate Finance” teams within a Chartered Accounting firm, Numbers Executive endeavours to explain the pros and cons of working in the “Valuations” line of service (AKA “Valuation Advisory” or in some teams “Valuation and Business Modelling”).

Our insights are based entirely on Numbers Executive’s precedent experiences and we caveat that our views represent common outcomes we have seen. As with everything, there can be outliers..

The Elevator Pitch:

Put simply, a Valuations team provides its clients with technically sound (and often relied upon) advice pertaining to the valuation of both its existing and potential assets and / or liabilities.

Whilst specific services vary across teams the majority of revenues these teams derive will originate from:

• The provision of Independent Expert Reports and Fairness Opinions to support a deal driven event such as mergers, acquisitions and divestments
• Compliance-type work such as Purchase Price Allocation advice (i.e. determining the distribution of goodwill / acquisition premiums / losses across an acquirer), balance sheet impairment testing, IFRS reporting requirements and tax related valuations / value consolidations
• Supporting an unlisted investor (e.g an unlisted infrastructure fund and private equity firm) by undertaking a valuation of its investments for unit pricing purposes
• Other ad-hoc valuation advice, for instance for employee options schemes or undertaking scenario analysis to evaluating the knock-on effect of a particular decision to future value etc.

What’s great about it:

• Develop an exceptional understanding of corporate finance theory / valuation theory
• Build an understanding of value drivers and metrics across a variety of sectors
• Develop a good combination of qualitative report writing skills and quantitative analysis skills
• Exposure to a variety of sectors and clients that promotes the development of a “client coverage” perspective of the world
• Build a healthy professional network spread across advisers (Investment Banks), Corporates and Fund Managers (such as infrastructure funds)

What to be conscious of:

• The mix of compliance work (e.g. Purchase Price Allocations) vs the deal-driven work (e.g. Expert Reports) can vary between teams.
• Exposure to financial analysis / modelling is often limited to the mechanics of the valuation (e.g. timing or cash flows, calculation of discount factors, terminal valuation methodology, multiples analysis) opposed to whole-of-company analysis.
• In order to mitigate risk, Valuations teams “rely” upon the financials / models provided by the client / adviser to be accurate, hence teams have minimal (if any) exposure to modelling the entire company
• Minimal exposure to the capital spectrum (i.e. debt or equity analysis / raisings)

Most common future employment outcomes (with only this skillset):

• M&A teams within Investment Banks or Advisers (likely at the Analyst level where you can build upon your foundational skills)
• Equities research (buy or sell-side) – again at a junior entry point
• Asset consulting
• Decision support / Capital Evaluation positions that rely upon a detailed business case with an NPV Analysis
• Corporate Development / Business Development (if complementing an existing team with M&A backgrounds)
• Alternative Investors such as Infrastructure Funds / Private Equity firms – often when the individual has first-hand experience valuing the funds assets as a service provider

Our advice to Valuations professionals wanting to move into a Corporate Finance or M&A environment

Valuations teams offer you an excellent platform to develop technically strong valuation skills and a high level client coverage mentality. The financial analysis and general outcome delivered by the team can be quite narrow for those who do not want make valuations their life-long vocation.

Pairing your strong technical valuation experience to a sister Big 4 team such as M&A, Financial Modelling or Debt Advisory would be beneficial in developing you into a well-rounded corporate finance professional with a variety of future employment options.

Whilst we would always promote further studies such as the CFA designation or a Master of Applied Finance, it would be likely that your valuation experience would provide much of the useful theoretical knowledge required that other teams may not provide the exposure to.

Short courses such as Wall Street Prep or Training the Street could assist in providing exposure the broader financial analysis.