The key benefits to appointing a specialist debt advisor

The key benefits to appointing a specialist debt advisor

It is widely recognised that navigating the intricate landscape of M&A transactions requires a deep understanding of its process from start to finish. This experience can only be gained by doing transactions year in, year out, and for this reason organisations readily (& wisely) seek to appoint M&A advisors early on in projects.

However, when it comes to appointing debt advisors, clients will often say they have an existing banking relationship and may have raised debt on their own previously, so they are comfortable raising new debt on their own. This often leads to issues down the road in terms of securing the best possible pricing, time & resource management and long-term financial planning.

Here are just some of the ways in which a specialist Debt Advisor can use their expertise, market insight, negotiation skills and network of contacts to successfully raise debt for clients on the best possible terms:

1. Debt Structuring: At the outset of a debt raise, it is essential to define the borrowing requirement and the optimal debt structure for a client. With many more alternative lenders operating in the Irish market today, a company can waste valuable time talking to the wrong type of lenders. A Debt Advisor will assist with tailoring a bespoke debt structure for each client to maximise time, energy, and resources.
2. Finding the Right Lender: Similar to the above, but a key consideration, is finding the best partner for an organisation. A borrower is entering into a long-term financial relationship with an institution so finding the right fit is a top priority as a difficult lending relationship can be extremely detrimental to a business. A Debt Advisor will be able to provide invaluable insight into which lenders are right for each borrower given there is no one-size fits all solution to raising debt.
3. Pricing / Fees: The most accepted and tangible benefit of using a Debt Advisor is to run the debt process for a client. The first stage of this typically involves approaching multiple lenders who then then compete for the lending opportunity. This builds competitive tension amongst lenders, which is ultimately beneficial in getting the best deal on fees and margins.
4. Covenant Structures: As part of the initial debt raising process, broader commercial and legal terms form part of the initial negotiation also. Having an advisor on board helps to bring key terms most relevant to a client to the fore early in the process. This means negotiation of these key points takes place while competitive tension is highest amongst lenders within the early stages of the debt process.
5. Project Management: Timing and resources are naturally big challenges when raising finance, often distracting management teams from running day-to-day operations. Having the support of a Debt Advisor who knows the process and can set realistic timelines will ensure appropriate planning can be undertaken. A Debt Advisor will also drive the process forward and ensure the process is delivered on time.
6. Lender Due Diligence: The more relevant information that can be provided to lenders at the beginning of a debt process, the quicker and more smoothly a debt process will run. Lenders will need to conduct their own due diligence when preparing for their credit committees so providing them with clear, concise information at the outset is key. A Debt Advisor will know the core information requirements of each lender which will limit the follow up detail requested by lenders, thus freeing up management time. Debt advisors can also confidently push back where information requests are unreasonable.
7. Bank Jargon Translator: Another upside of using a Debt Advisor is having somebody onside that understands the intricate workings of banks and raising debt. Lenders tend to ask a lot of questions (more than you think possible) and will make requests of a management team that can sometimes feel invasive & unnecessary. Having an intermediary (especially one who has asked these questions themselves while working as a lender in the past!), means that misunderstandings and miscommunications can be minimised. 
8. Post Drawdown: Once documentation has been signed and debt drawn, issues can and do arise. A particularly material area is around covenant management and covenant compliance testing. Borrowers can often reach the first covenant testing date, only to find that ratios are tight, or worse still, breached. This can put stress on the borrower, strain relationships with lenders or cause an event of default that needs to be rectified. Debt Advisors are experienced in assessing, analysing and negotiating such scenarios and can save a business a great deal of stress and time during the documentation phase of loan agreements.  
9. Long Term Strategy: Potentially the most valuable benefit of working with a Debt Advisor is that they will be thinking on a longer-term basis, not just about the current transaction. A debt facility has a finite term at which point outstanding debt will need to be repaid or refinanced. A Debt Advisor will assist with putting a longer-term debt strategy in place, helping to safeguard the future of a client’s business.

At Azets Ireland, our Debt Advisory Team, incorporating experienced finance professionals from our Corporate Finance & Corporate Advisory teams, can provide tailored debt management solutions and help you navigate through this dynamic market and help you target your efforts more effectively.

“We understand that there is no one-size-fits-all solution when it comes to debt advisory. Each business is unique, with its own set of goals, challenges, and opportunities. Our approach is centred around delivering bespoke debt management solutions that are aligned with the specific needs of our clients” David Lucas, Head of Corporate Finance, Azets Ireland.

“Whether it's raising debt for an acquisition, refinancing existing debt, raising new capital for capex or working capital, our team works closely with each client to develop a tailored debt strategy through our extensive network and industry relationships to connect businesses with the right lending partners” Allan Barrett, Debt Advisory Lead, Azets Ireland.