6 challenges M&A advisors must learn to navigate
11. May 2017
The financial industry is constantly changing – in order for financial advisors to provide value for their clients, they need to be able to identify these challenges and adopt the necessary changes. The world is becoming more interconnected and technology is transforming the way we communicate and do business. Both trends are driving the main challenges M&A advisors need to navigate and overcome if they want to continue providing high-quality service to clients.
So, what are the six biggest challenges facing M&A advisors?
One of the major challenges continues to be the increasing globalisation of the M&A sector and the financial sector in general. Mergers and acquisitions are not localised in the same way that they used to be – markets are more interconnected and the location of the firm does not determine its ability to make deals. Globalisation means the advisor has to be able to absorb information of different markets and to be able to operate in the global context, rather than keeping an eye on the localised markets.
The M&A sector is also experiencing the effects of digitisation of the financial industry. The sector has moved from deal making in office rooms to conducting everything from deal making to managing deal flows online. Furthermore, digitisation is taking most information online, making it essential to find secure ways to manage this sensitive information without jeopardising it. For a modern advisor, the ability to use and embrace technology will be a crucial part of succeeding.
Specialisation & Boutiques
The two challenges above have also influenced another major trend in the industry: specialisation. Investors are no longer looking solely towards big firms to manage their investment activity but there is increasing interest towards finding specialised firms. Boutiques have been on the increase after the 2008 crash, when investors started focusing more on a dedicated advisory experience and finding operators that don’t have to deal with the same conflict of interest issues as major accountancy firms might have to, for example. However, boutiques have their set of challenges as well – fragmentation is an issue and competition against multi-nationals in a globalised world can be difficult for small advisor teams.
Relating to the above point is the difficulty of differentiation. The field is getting increasingly crowded and even when advisors specialise, they still need to stand out from other boutique advisors. In the competing landscape, advisors must be able to clearly outline their value proposition to clients – transparency is an important tool to fight against this challenge.
Interest rates have always been a major focus point of advisor and the current low-interest rates are causing problems, especially for fixed-income investors. Advisors have to juggle incorporating the interest rates in the portfolios and preparing for the likely rise in the rates.
Capital market change
But there is also a big shift in the capital markets. Capital is much less ‘localised’, driven by globalisation, and the financial services industry is starting to service its customers in a new way. Transactions are changing, largely due to the growth of the fintech sector. One of the other aspects of changing capital markets is also the shift from one generation to the other. There are differences in how generations approach the markets and this is something advisors need to keep in mind. For example, Millennials are quickly adopting AI-platforms and management tools such as virtual data rooms, driven by the understanding that fintech offers plenty of value for money.
As the above shows, there are plenty of challenges facing M&A advisors. In order to make it in the competitive and challenging landscape, modern advisors need to be able to adapt quick and be constantly looking ahead.