Capital and financial advisory is highly important to facilitate the process of raising, deploying, restructuring and optimising capital in a compliant and sustainable approach by businesses. Capital decisions are not imposed on financial measures in the regulated and rapidly changing UAE business environment. They need to be aligned to legal frameworks, regulatory requirements, governance structures and long-term strategic goals.
Capital and financial advisory is the act of helping businesses, investors and shareholders make sound choices in regards to capital structure, funding strategy, financial restructuring, and transaction preparedness and effective risk and regulatory exposure management.
What Is Capital and Financial Advisory?
Capital and financial advisory is referred to as professional advisory services that assist businesses in issues of capital planning, funding, valuation, financial structuring, and financial risk management. These services apply in the lifespan of business formation and growth, as well as the restructuring, investment, or exit.
The capital and financial advisory also need to take into account the following in the UAE context:
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Business and commercial law
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Regulatory and licensing systems
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Financial compliance and corporate tax
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Governance and shareholder constructions
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Intercountry investment factors
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Sovium of Capital and Financial Advisory Services
Capital and financial advisory is usually a broad area of financial strategic and operational issues.
Read : Separation structuring
Optimisation and Structuring of Capital
Capital structuring aims at establishing the best equity, debt, and hybrid composition that best supports business goals and ensures financial sustainability.
Key considerations include:
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Share capital structure
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Debt financing and leverage
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Dilution of equity and shareholders
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Capital requirements of regulations
Fundraising and Investment Advisor
Companies often need advisory services when they are raising capital using private equity, venture capital, or strategic investors or debt fund.
This includes:
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Evaluation of funding strategy
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Investor readiness
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Organising investment instruments
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Implications to shareholders and control
Financial Restructuring
When businesses are in a liquidity position, under stress, and/or in a shifting market environment, financial restructuring is needed.
The most common restructuring scenarios would be:
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Debt reorganisation
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Reduction or consolidation of capital
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Shareholder realignment
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Business turn around planning
Restructuring of finances in the UAE has to conform to the legislation on insolvency, corporate laws, and other credit protection measures.
Financial Analysis and Valuation
A fundamental part of capital and financial advisory, especially in a transaction, restructuring or shareholder exit, is valuation.
The valuation assistance might be:
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Business valuation
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Asset valuation
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Share valuation
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Financial modelling and forecasting
Proper valuation will be necessary to promote equity, regulation and sound decision making.
Transaction and Deal Advisory Support
Capital and financial advice tends to work complementary to transactions: mergers, acquisitions, separations, or investments.
This includes:
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Transaction feasibility study
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Support in terms of financial due diligence
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Deal structuring Input
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After sale financial integration planning
UAE Regulatory and Legal Causes
The financial advisory and capital business in UAE exists in a regulated environment where legal and compliance issues must be put into serious consideration.
Corporate and Governance Compliance
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Shareholder approvals
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Board resolutions
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Modification of constitutional texts
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Disclosure and reporting standards
Implications in the Regulatory and Licensing
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Activity based licensing regulations
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Free zone and mainland regulatory requirements
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Sector-specific approvals
Tax and Financial Compliance
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Corporate tax exposure
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Considerations on transfer pricing
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Audit and financial reporting requirements
Inability of harmonizing capital decisions with legal and regulatory stipulations can leave businesses to penalties, conflicts or staged transactions.
Read: Readiness review
Capital and Financial Advisory vs Due Diligence
Although closely related, capital and financial advisory and due diligence are used to serve various purposes.
Capital and financial advisory is concerned with the planning, structuring and the optimization of future financial results.
Due diligence investigates any and all prevailing financial, legal and operation risks in order to justify assumptions and know exposures.
The success of advisory on capital decisions depends on due diligence discoveries to make the financial strategies realistic and risk aware.
Threats of Insufficient Capital and Financial Planning
Misjudged capital decisions can lead to:
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Lack of efficient capital structure
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Shareholder disputes
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Regulatory non-compliance
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Increased financial risk
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Reduced business valuation
These risks are likely to be realised whenever they are conducted in a transaction, audit or regulation process and therefore corrective measures prove to be costly.
Read: Target screening
Significance of Strategic Financial Planning
Proactive capital and financial advisory allows the businesses to:
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Based on long-term objectives
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Improve funding efficiency
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Controllable financial and regulatory risk
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Increase investor confidence
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Support sustainable growth
In the UAE, pre Covid-19, financial and legal harmonization plays a crucial role in enhancing results of transactions and business survivability.
FAQ’s
What is capital and financial advisory?
Does capital and financial advisory apply to small and medium enterprises (SMEs)?
Is there any regulatory compliance in the capital advisory in UAE?
When do you think a business should seek capital and financial advisory?
Is capital and financial advisory assistance effective in enhancing business valuation?
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Conclusion
One of the basic aspects of corporate strategy in the UAE is capital and financial advisory. Both in favor of growth, restructuring, investment or exit, expert financial advice means that capital decision making is legally appropriate, is strategically oriented and commercially viable.
In combination with governance, regulatory awareness and risk management, capital and financial advisory affords the businesses with the clarity and framework to make intricate finance choices in a marketplace that is continually changing.
