TABLE OF CONTENTS The expression 'corporate finance' generally refers to the mechanisms and processes by which businesses raise capital or enhance capital values for operations and growth. Capital can be raised in a variety of ways, such as by the issue of shares or debentures, or the provision of loans or banking facilities. Capital values can also be enhanced or protected when businesses are merged, acquired or restructured. The mechanisms and processes can either be private or public in nature, depending on the objectives of the corporate finance exercise.
The mechanism or processes by which corporate finance is provided, or the corporate finance transaction executed, as well as the nature of the transaction contemplated, will determine the level or type of due diligence required or available.
For example, the level of due diligence required for a secured borrowing facility will be significantly less than that required for an equity investment. The lender will simply be looking to ensure:
his or her loan will be repaid together with interest over the term and that there is sufficient net cash flow cover to ensure repayment; and
the value of the security is sufficient to cover the loan to value given.
A highly liquid publicly traded stock will have a higher loan to value than an illiquid stock and certain types of real estate, such as development or commercial properties, will have lower loan to values than residential properties. On the other hand, an equity investor, such as a venture capitalist, will be concerned...
