Investment consulting
Service
DANEROCK Investment Group offers:
• Investment financing from €50 million and more
• Minimizing the contribution of the project promoter
• Investment loan term up to 20 years
• Loan guarantees
Sector
✓ Project finance and investment consulting from DANEROCK Investment Group:
• From €50 million and more.
• Investments up to 90% of the project cost.
• Loan term from 10 to 20 years.
Increasing competition along with economic risks are increasing the demand for professional investment consulting services.
These services are becoming increasingly important for projects initiated by both large private companies and government agencies.
Investment consulting include, but are not limited to:
• Development and comprehensive support of the investment project.
• In-depth analysis and assessment of the effectiveness of a business project.
• Fundraising and consulting on instruments for raising capital.
Each of these services affects the investment activities of the business, based on the use of special consulting technologies that can increase the likelihood of project success.
Implementation of large projects on the basis of intuition no longer corresponds to economic realities and cannot meet the growing demands of business in the context of globalization and entry into world markets.
As doing business in many industries today faces increasing competition for capital, fundraising has become an important element of investment consulting.
Fundraising as a comprehensive service includes the following:
• Search for potential investors and lenders.
• Development of a high-quality presentation of the project.
• Effective communications with major capital providers.
• Modeling and forecasting cash flows.
• Financial guarantees, etc.
Today, the key task of an investment consultant is to create mechanisms to ensure that the interests of the project participants are met in the long term.
Professional services in this context help companies to prevent severe financial or reputational losses by ensuring that the investment agreement is adequately structured and financial flows are properly managed.
Investment consulting services for medium and large businesses
This type of service can be viewed from two sides, depending on the type of client and his interests.
From the point of view of real sector companies, investment consulting is focused on finding and attracting financing for investment projects. From the point of view of a potential investor, these services represent a professional search, formation and management of an investment portfolio that best suits the profile of a particular investor.
In this section, we consider investment consulting from the point of view of a large business that needs to attract financing and manage financial flows in the framework of investment projects.
If you are interested in financing your project in the EU or abroad, contact the experts of ESFC Investment Group for more information.
Definition
The enlargement and increasing complexity of investment projects, the improvement of structuring and project financing technologies require company managers to better understand the potential and risks of innovative forms of financing, the specifics of interaction with different investors, ensuring the commercial interests of project participants, and more. In the 21st century, even large companies are often unable to ensure the high quality of investment processes on their own.
These companies, along with government agencies and other players, are driving the demand for consulting.
Against this background, investment consulting services are becoming a valuable tool for increasing the competitiveness and efficiency of companies by using advanced methods, investment design technologies, organizing and managing investment activities, managing financial flows, etc.
Investment consulting can be defined as the process of providing professional services / advice to a business on the development, selection and application of the best option for a project, fundraising and achieving target financial indicators.
Objectives and scope of consulting services
Elements of a comprehensive investment consulting service can sometimes be provided to customers as separate services.
In global practice, the most demanded services are:
1. Pre-investment research.
2. Development and evaluation of an investment proposal.
3. Development and evaluation of a business plan.
4. Modeling the financial flows of the project.
5. Analysis of business opportunities, risks and vulnerabilities.
6. Development of a financial model.
7. Project presentation.
An important role in this context is played by numerous related services, including the approval of an investment project in local authorities, obtaining licenses, developing technical documentation, and the like.
The goals of hiring external experts can be to obtain an objective assessment of the situation, to professionally solve specific project problems, as well as to help businesses in critical situations. Some European financiers identify so-called “resource consultants” (specialists who suggest what to change in a project) and “process consultants” (specialists who suggest how to change certain aspects of a project and teach clients to solve problems).
Analysis of the structure of services of consulting companies specializing in large business allows us to highlight the most important areas of work of corporate investment consultants.
This includes the following:
• Minimization of risks for participants in a project, including planning, assessment, analysis and support for the implementation of investments.
• Ensuring effective communication, which consists in a clear dialogue between the business owner and its investors and other capital providers.
• Engineering services, which include technical improvement of project components in order to achieve the best result for the participants.
Our team of experts with over 20 years of experience in project financing is ready to solve any problems that arise during the investment process.
Contact ESFC representatives to find out more.
Investment consulting demand
In recent years, the global demand for investment consulting services has been growing at the expense of SMEs, large businesses, banks and government agencies.
Although the relative share of SMEs in the demand structure has increased, large and expensive projects are certainly being implemented with the participation of multinational companies and governments.
Such services as the search for investment objects that meet certain requirements, Due Diligence and a comprehensive assessment of the project’s effectiveness, as well as legal support, are becoming more and more relevant for investors. The initiators of large projects are primarily interested in the development of a financial model / business plan, preparation of project documentation for investors, search and attraction of funding sources, determination of the most appropriate resource use schemes.
Such services in the context of large investment projects are quite expensive, since they require consulting companies to use advanced techniques, experience, knowledge and business contacts.
Classification of investment consulting services
Leading financial experts view investment consulting as an element of strategic business consulting.
A number of international companies include it in the list of financial consulting services, which is logical. On the other hand, some consulting firms are moving business planning or financial modeling beyond investment consulting services.
Investment consulting is associated with the implementation of projects in the real sector of the economy (although this does not at all exclude the use of securities for financing), while stock consulting focuses on financial investments.
Obviously, this type of service needs additional systematization and a clearer classification, which is currently lacking.
Any investment project consists of several stages of the life cycle, which include the pre-investment stage, the investment stage, the operation stage, and the final liquidation stage.
This provides for the following sequence of actions by the participants within the project:
1. Formation of investment intentions and the general concept of the project.
2. Conducting a detailed and comprehensive pre-investment analysis.
3. Construction / purchase of a facility and its preparation for operation.
4. Operation of the facility for the purpose of making a profit.
5. Closing / liquidation of the project.
The characteristic features of each stage of the project cycle determine the appropriate structure of investment consulting services for business.
This allows us to propose the following classification:
• Development of an investment project (from planning to the signing of investment agreements) and support of the client at every stage.
• Evaluation of the effectiveness and comprehensive examination of the investment project.
• Optimization of sources and methods of financing, fundraising in the context of choosing the best sources of financing for a specific project.
• Advising customers on optimal investment instruments, including analysis of an asset for its purchase / sale (Due Diligence), assessment of the company’s investment attractiveness, determination of priority investment areas and much more.
Below we will take a closer look at each type of investment consulting services, focusing on fundraising (raising capital for projects) as the most important aspect for a business.
Project development and investment memorandum
As part of raising capital to finance large projects, consulting companies can develop a strategy and business plan, as well as draw up an investment memorandum.
This activity is critically important in the context of investor interest and awareness.
Investment consulting companies offer clients the development of project documents according to the standards / recommendations of UNIDO, the European Bank for Reconstruction and Development or the specialized financial body of the host country.
Consulting service for the development of an investment project includes the following:
• Assessment of the sector and specific investment object.
• Professional financial and legal analysis of an investment project.
• Preparation of analytical report, business plan and detailed road map for the client.
• Establishment of checkpoints and intermediate indicators for project monitoring.
• Presentation of the project to potential participants.
At the request of the client, information on alternative directions and projects can be prepared, as well as an assessment of the selected executing companies responsible for the implementation of the project.
Consulting support of a project means real-time assistance by professional consultants who help solve business problems on a daily basis.
This type of service enables large businesses to avoid costly mistakes in project implementation, and also helps in solving less significant tasks for which clients cannot always allocate time and human resources.
Consulting support of projects is advisable for the following clients:
• Companies that have encountered systemic investment difficulties and do not have a clear understanding of the further progress of projects.
• Companies that need to attract an effective external investment team for the implementation of projects, including the management of financial flows.
• Companies that need to attract additional financing for large capital-intensive projects and do not have relevant experience.
Below are the documents that must be submitted to investors for the successful implementation of the project. Companies that specialize in investment consulting for large businesses can provide invaluable assistance in the development and presentation of these documents.
Table: Brief description of the package of documents for the presentation of a large project.
| Document type | Short description |
| Investment teaser | Brief presentation of the project. This is the first important document for a potential investor, which is designed to attract the investor’s attention without disclosing details and ensure that it gets into the short list of interesting projects. |
| Feasibility study | This is a detailed document that discloses plans for the development and placement of an investment object, its design capacity, technical aspects, needs for energy, raw materials and fuel, etc. |
| Business plan | A business plan is a carefully prepared document that discloses all aspects of any commercial project. The plan allows participants to review and adjust, if necessary, measures to implement a business idea, determine financial support and potential benefits. |
| Investment proposal | This document should present the project to investors in order to raise capital. It usually contains a description of the project, as well as an estimate of cash flows in a certain time horizon and an estimate of the return on investment. This document is extremely important for structuring the agreement, building a financial model of the project, and the prospects for its implementation. |
| Options for investors to exit the project in the future | This can be a stand-alone document or part of an investment proposal. Options for investors’ exit from the project should justify the possibility of selling assets and making a profit, such as the buyback of shares by management, placement of shares on the public market (IPO), etc. |
Finally, it should be noted the investment memorandum, which is being developed for the most efficient presentation of the project to potential investors.
The quality of this document largely determines the chances of attracting funding.
An investment memorandum is a presentation document with detailed information about a business and a project, developed to attract funding. The document contains the structure of the agreement with a potential investor, a detailed analysis of the company and its activities, taking into account the attracted investments. It includes measures to ensure optimal interaction between the investor, owners and project management after receiving funding.
Analysis of the effectiveness of an investment project
A comprehensive analysis of the effectiveness of an investment project has always been a laborious procedure that involves forecasting and modeling the cash flows, assessing risks and developing measures to minimize them. In many cases, companies do not have their own departments staffed with experienced specialists to perform this task well.
Professional support of companies providing investment consulting services helps the business to solve such important tasks at a high level.
A professional assessment of a business plan is associated with an assessment of the completeness, reliability and relevance of information, the accuracy of calculations, the validity of parameters, risk assessment, identification of project weaknesses and their impact on results, scenario analysis of efficiency, etc. These and other services give the initiators of the project obvious advantages.
Due Diligence and risk assessment
To assess the risks of buying assets or participating in a project, organizations and companies often turn to investment consultants for Due Diligence (DD).
Due Diligence is a complex procedure for a comprehensive verification of the business processes of a company or an investment project, assessing their legal purity and commercial attractiveness as investment objects to justify investment decisions and minimize investment risks.
There may be several reasons for conducting Due Diligence:
• Preparation for the sale and purchase of the company and / or its share.
• Assessment of the investment attractiveness of a company or project.
• Preparation of a merger or acquisition agreement.
• Verification of a potential partner, etc.
Among the tasks of Due Diligence, investment consultants single out the determination of the current price of an asset and its future price on the investment horizon to determine the profitability of the project.
The purpose of a deep check can be to minimize information asymmetries between investors and project initiators for more effective and safe investment.
DD aims to avoid or reduce the following risks:
• Buying a company at an inflated cost.
• Default of debt obligations by the borrower.
• Loss of assets due to participation in a risky project.
• Causing harm to the business reputation of the company.
• Recognition of the transaction as invalid.
• Lawsuits and sanctions.
• Corporate conflicts.
Due Diligence within the framework of investment consulting involves the study of all aspects of business, including marketing, financial, technical and legal.
Based on the results of the measures taken, all areas of the company’s (project) activities are combined into one report containing expert opinions on the profitability and risks of the project.
Since raising capital for large investment projects is the most important and complex part of investment consulting services, we will highlight this element in a separate section for more detailed discussion below.
Fundraising: attracting investments for large business
Fundraising, or raising funds for investment projects, is considered a popular investment consulting service today.
Arranging financing for a business project is a long, complicated and expensive process, which nevertheless does not give a 100% guarantee of success for each proposed project.
Fundraising in business consulting means a set of consistent activities to find and attract investors. Therefore, some consulting companies define this service as investment financing.
A good investment advisor comprehensively justifies the use of various instruments and methods of financing and develops an optimal financial scheme.
This is influenced by the following factors:
• Terms of implementation of the investment project.
• Project type and current industry specifics.
• Specific stage of the project cycle.
• Taxation system in the host country.
• The structure of the company’s assets.
• Capital market, etc.
In all cases, the purpose of this activity within the framework of investment consulting services is to raise capital on favorable terms for the customer using such instruments as long-term loans, issue of shares, leasing instruments, etc. Often these tasks are solved by project financing instruments (PF).
Financing an investment project should provide the following effects:
• Attraction of sufficient funds for the project as a whole and for each stage of the investment cycle in accordance with the schedule of their implementation.
• Minimization of risks and costs of project participants, each of whom strives to obtain the greatest benefit and has its own requirements for the results.
The greatest interest in attracting investors arises at the stages of launching a company (project) or its rapid growth. Consulting companies have huge databases of potential investors, understand their profile and strategy. Potential investors also use these contacts.
Types of investors and strategies for raising funds
The investment process includes the following stages:
1. Search and purchase of a profitable asset.
2. Receiving income for the period of ownership of the asset.
3. Search for a new buyer of the asset.
4. Sale of an asset.
Income for the investment period consists of regular income for the period of ownership of the asset and the final income as a result of changes in the market value of the asset:
• Passive investment strategy: the investor’s activity ends with the acquisition of an asset, after which he receives dividends or profits (the so-called “buy and hold” strategy).
• Active investment strategy: the investor is interested in the growth of income and capitalization of the asset (increase in value over time). In this case, the investor seeks to get more money from the growth in the value of his asset, tracking changes in value and being ready to sell it at any time.
Different types of investors have different motivations and goals for participating in the project, they are attracted at different stages of the project cycle.
Thus, depending on the type of project of the life cycle stage, the goals of the investment rounds differ.