Debt Advisory

An Introduction to Debt Advisory

Ken Brady
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While company leaders have a deep understanding of their operating models and growth plans, they often need assistance in determining the best strategy for funding their business’s journey.

Debt advisory helps these leaders find, evaluate and select the best funding options available for their business, enabling them to execute their growth plans by ensuring that they have access to the funding partners and financing instruments best suited to their business needs and future goals.

Navigating the debt market is challenging. For leaders, discovering all the funding participants available to finance their future plans and determining which of these participants has the products that their business needs can be a daunting task. Debt advisory provides them with access to the expertise necessary for navigating the funding landscape, gaining knowledge about financing options, and obtaining the capital and terms required to achieve their business ambitions.

Navigating the Debt Market and Funding Landscape

Many different funding solutions exist within the debt market. A business’s performance history, growth trajectory, investment needs and future plans influence the participants and products that it will be able to access.

While many financing instruments appear straightforward, the type of investment that a business needs to make can increase the complexity of the funding product required, so understanding both the types of funders and products available is essential for leaders making a financing decision. For instance, a company seeking to extend a factory will have different funding options than one seeking to acquire a competitor because the former is pursuing an organic investment while the latter is pursuing an acquisition-led investment. Both need access to financing, but they’ll have access to different options for lenders, products and terms within the same market.

One of the reasons that navigating the Irish debt market is challenging is that country has a condensed banking market and a fast growing alternative private capital market. This lending market has changed tremendously in the past 10 years, driven by external forces. In some instances, accessing capital via products and channels has become more difficult for businesses.

Ireland is home to approximately 309,000 micro-, small- and medium-sized enterprises, the majority of which have credit instruments on their balance sheets. The financing solutions and debt products offered by traditional banks are well-suited for many businesses with a strong performance record and relatively straightforward funding needs. However, when a business has a financing need that a traditional bank can’t satisfy, it either needs to limit/change its growth plans or find an ‘alternative lender’. The funding landscape outside of the traditional banking sector can be more complex. Many company leaders are not aware that these alternative funding participants exist, and those that are often don’t know how to access them or evaluate their products. As a result, business leaders find themselves trying to make important financial decisions without having all the information they need to do so.

A debt advisory team can help—first by listening to and understanding the company’s investment needs and then by mapping the landscape of available funding participants and connecting leaders with the appropriate debt financing options.

When companies attempt to locate and access these funding participants on their own and without a deep understanding of the market’s key players, they often miss out a number of funding opportunities. Many Irish businesses also don’t have a strategy for finding debt providers outside of the domestic market even though international lenders often have an interest in financing local operations.

Debt advisory teams can help companies of all sizes by increasing the scale and breadth of financing options to which they have access, and with its global footprint, Grant Thornton’s debt advisory team can also provide Irish companies with access to international capital providers.

Supporting with Deal Structuring and Transaction Execution

After helping companies take a step back and examine the debt market thoroughly, debt advisors also support companies with their execution strategy. Optionality is crucial—especially with the current macroeconomic environment— and debt advisory teams keep as many options on the table as possible when structuring a transaction.

For instance, companies are often wary of having excessive debt on their balance sheets during uncertain economic times because it enhances the risk of encountering a financial difficulty if their underlying market weakens. When helping to structure transactions, debt advisors can assuage these fears by sizing debt appropriately so that it remains ‘sustainable through the cycle’ and by introducing options within the debt structure that can be utilized should the business encounter unforeseen events.

When assisting with executing a transaction, debt advisors think through the ways in which the macroeconomic situation can affect a business now and in the future. With this guidance, business leaders can ensure that their chosen debt product and funding partner align with the business’s anticipated growth trajectory but also provide the flexibility needed to navigate the market’s inevitable ebb and flow, allowing them to maintain control of their business even as they encounter changing economic cycles.

How Grant Thornton Can Help

Our Debt Advisory team works with corporate clients, advising on all debt capital markets products locally and globally. We provide trusted expert advice, assisting clients with sourcing, negotiating and structuring new or existing debt.

The team has expertise in various sectors and markets, including bank facilities, debt capital markets, alternative lenders, leveraged finance, asset-based lending, real estate finance, structured finance, non-profits and charities and company-side restructuring finance. The Debt Advisory team is integrated with and works in collaboration with Grant Thornton’s Deal Advisory. The team is also complemented by Grant Thornton’s global debt advisory network and other professionals throughout member firms.