Confused about the difference between Advisory/Corporate Finance/Investment Banking

gw94's picture
Rank: Senior Chimp | 18

Currently working in a mid-size accounting firm in London and looking to transfer to our 'corporate finance' department. The department works on M&A, Valuations, Due Diligence/Transaction Services along with a couple other things (Restructuring/Insolvency). The firm has 100 employees in a City of London Office.

What is the difference, firstly, between the advisory work that this department does compared to, say, a boutique regional investment bank? Do the people in the corporate finance departments of accounting firms refer to themselves as Accountants? Bankers?

Secondly, what would be the difference between a boutique regional investment bank and a purely 'advisory' firm and how do I spot the differences between the two? I see firms offering M&A advisory services for example, however with no mention of being an investment bank.

Would there big significant differences in compensation/deal size between the above?

Comments (14)

Best Response
Dec 5, 2017

I know every Corporate Finance organisation in the UK. These are usually divisions of large accountancy firms (examples: PwC, Deloitte etc., but also Francis Clark, RSM, Larking Gowen), but not always.

Over the last ten years or so there have been several small groups of accountants who've formed CF businesses and do exclusively CF work (Examples: Strategic Corporate Finance, Gambit, JDC).

The people in the smaller firms refer to themselves as "partners" or "directors" rather than accountants. They are competing for business with the likes of business brokers (BCMS, Bluebox, KBS etc) and so don't emphasise their accountancy pedigree.

Some of these CF firms provide just advisory services - debt restructuring type of advice. Others take on business disposal transactions. This could involve selling the business on behalf of the owners or it could be other equity exits (IPOs, MBOs, MBIs, VIMBOs....). In the case of business disposal they advice on preparation of the business for sale, creating the Information Memorandum, attracting M&A players/PE firms/other investors and negotiating the deal on behalf of the vendors. They typically charge 40K-50K on signup with a 2% to 5% commission on the final sale price and take on businesses in the lower mid-market ... anywhere from deal values of circa 1m to about 20m.

Investment banks tend to work on mid-cap deals, very firmly in the 50m+ category.

With respect compensation, it's difficult to comment without knowing what your skills are, your level of experience, your qualifications etc.

    • 5
Dec 5, 2017

Thanks for the response.

I think you pretty much cleared it up for me, but a few questions about your response:

  • Why would the partners of the CF divisions in the small firms wish to hide their accountancy pedigree when competing with business brokers? Are advisory services typically not considered the area of expertise of CAs or something?
  • Do you mean that CF divisions of accountancy firms are essentially the same thing as small advisory/M&A shops, simply nested within a larger accounting firm (Occupying the under 50m space) whilst boutique investment banks would typically dominate business with companies valued above 50m?
  • Does the differentiation between an investment bank and an Advisory/CF firm/department have to do with investment banks underwriting debt/securities and pure advisory shops not doing so? (Eg. Is a firm like Rothschilds not an investment bank but a large advisory firm, and its employees not 'investment bankers' per say?)

Cheers again

Dec 5, 2017

1 They don't go to great lengths to hide their accountancy backgrounds, but rather choose to emphasise their expertise with business disposals. They do advise on accountancy matters, their advice in this area being generally around the company's final accounts and accounting records.

In the UK there are no qualifications required to advise on business disposals, so the CA qualifications aren't of any great help in attracting clients (though those skills are invaluable with the valuing of businesses and, later in the process, with structuring deals). They often also provide vendors with related tax advice - CGT / ER etc.

2 Yes

3 Some of the larger CF houses are not just FCA regulated by also have SEC/FINRA/you name it! So, IMO, there really is little to differentiate them from IBs (...except for the fees!)

    • 1
Dec 5, 2017

What are your views on the "street cred" of the Big 4 M&A teams in London? I've seen people post that most of them end up going to boutiques / MM firms after that as its not easy to break into IB / PE directly.

I know there have been a couple of discussions on this board but I can't find any that speaks much about the UK market.

Dec 5, 2017

Obviously, if you're one of the Big 4 you don't need to worry about street cred - everybody has heard of you.

My personal experience dealing with them has been dismal. Their CF services, by and large, are slow, sloppy, frustrating. But for business disposals they do charge a lot less than boutique M&A advisory firms! People are often surprised by this. Personally speaking, I try to avoid using the Big 4, I prefer using the smaller CF firms.

With respect employment, I'm afraid I can't advise. I don't know anything about the job application process or what's easy/difficult to get into. I've never applied for a job, ever. Sorry.

    • 1
Dec 6, 2017

Thanks for your insights. What I meant by street cred was if they are looked upon positively or negatively.

Thats interesting to know - I would have thought that since this is an area which they want to grow in (non-audit side of things) that they would have gone above and beyond to ensure that service is on par with the competition!

Dec 9, 2017

Big 4 M&A teams are usually top of the leaderboards in # of deals done. In Europe they have better credibility than in the USA from what I have heard.

From speaking with MD's of large IB firms the biggest reputation problem you have at a big 4 is that they simply think you are just doing due dilligence (usually the only teams they see on big deals from big 4's), while the CF teams are basically MM IB's in terms of work done (and depending on the big 4 - firm I interned with had lead sellside advisory on a $1 billion + deal when I was there) dealsize.

Dec 6, 2017

Has anyone successfully transferred from an audit role to a CF role within accounting, or entered into an advisory shop straight after graduating?

If so, could you advise on preparation for interviews? My academics aren't as good as some of the others however I hope to learn some technicals about the advisory side of the business to give off the impression that I can 'hit the ground running' so to speak, which I hope would be desirable for the team if they're busy.

  • How useful would the materials in the Wall St Prep course be for advisory/CF shops, I know these are typically for IBers, is there anything I should skip if I chose to take the course?
  • How about some of the staple texbooks I hear about on WSO (Eg. Valuations by Damodaran/Investment Banking by Rosenbaum)
Dec 6, 2017
Dec 8, 2017

Those are excellent threads and explain the UK differences brilliantly. I recommend the OP reads all of them.

Dec 9, 2017

Cheers Asatar, these look good - the last one about IB in the UK is especially interesting. I hadn't seen any mention of the Broker and the Sponsor/Nomad in any other resources.

Dec 10, 2017
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