I deliver Arup’s strategic consulting...
The past two years have brought highs and lows for infrastructure and property investors around the world. In Australia, I’ve watched several large, complex infrastructure projects go awry as a result of unforeseen technical and operational difficulties.
Not surprisingly, the dealmakers and operators I talk to in the infrastructure and property sectors want to understand more about market drivers, operational issues and ways to improve performance. For me, quality transaction advice is the key to helping them maximise returns on their assets.
I believe that to make a truly informed, unbiased judgement about risk and return, dealmakers need to integrate three types of expertise: financial, technical and commercial. But whose job is it to do this?
Is it the engineer, the banker, the accountant, the lawyer or the tax adviser who can look across the whole picture of risks and potential returns, and boil it all down to the bottom line for the client: what is the asset worth? Can they help clients understand what they will be letting themselves in for in terms of operational risk, ongoing maintenance, customer retention or defection and all the other things that can go wrong?
This is where transaction advisers come in. They act as an independent and impartial adviser to clients, in a diverse, interesting role that requires a special set of skills. It also requires an environment that’s conducive to straight talking between the client, their bankers and investors.
To offer effective transaction advice you cannot be too worried about what the client might want to hear. Instead, you need to concentrate on carefully translating technical and commercial issues into a risk-based financial analysis. This enables them to fully evaluate the risk/return equation on the deal, and to reconcile the transaction adviser’s views with their own assessment of the transaction.
I believe good quality transaction advice can make a world of difference to the success of infrastructure investment.
In an era where cash is in short supply but our cities demand ongoing infrastructure renewal, I’d love to hear about your experience in this field.