Corporate finance vs. Corporate Development: Take a call

Have a dream of becoming a top executive in huge multinational companies? Corporate Finance and corporate development domain present you some of the golden opportunities to achieve that dream. Both the domains have enough horsepower to boost your career in the right direction and allows you to put fatter paychecks in your pockets.

India has a vibrant financial sector where more than 60 % of the assets in the industry are held by commercial banks. The mutual fund industry witnessed a fivefold increase in the expansion rate and the merger and acquisition activity increased at an astronomical rate. With the rising demand for personnel in the finance industry companies are hell bent to recruit fine MBA graduates to provide strong back holds to their business in the market.

Both of these domains provide a luxurious life to the personnel so the main question arises how to choose one as a career? There are many aspects to deal with so let us start with the fundamental definition of both the job niches.

What is Corporate development?

Corporate Development (CD or Corp Dev) is the unit of personnel in the organization responsible for the economic growth of the business by developing cut edge strategies on different M&A (Merger and Acquisition) activities and JV (Joint Venture) deals by indulging in sourcing and deal analysis.

Main tasks in the department are:

  1. FM&V (Financial Modelling & Valuation): Exhaustive and comprehensive research of the revenue, cash flow, and expenses are required in FM&V. You need to minutely monitor the different aspects in joint venture deals as the revenue management in the deals are often complex
  2. Sourcing: One of the crucial tasks of the department is sourcing which represents comprehensive researching of other partners and companies in the market with whom different deals can be finalized to ameliorate the growth of the business.
  3. DA (Deal Analysis): Management of all the aspects of the deals like mergers, acquisitions, joint venture etc. from their commencement to the end represent s deal analysis. It is a crucial task as the team has to compile all the important data of the partner company land carry out due diligence and exhaustive research of customer agreements and relationships of target companies.

Comparison of tasks in small business firms and large business firms:

What is Corporate finance?

The corporate finance department revolves around the capital of the organization. It is responsible for the overall management of the capital structure i.e. efficiently dividing the financial resources of the organization. The sole purpose of the department is to maximize the growth rate of the business with the available financial resources and to minimize the risk. The team has to plot strategic measures to create a good balance between risk and profitability.

Careers in the department are:

Different activities in both department

Before opting a particular job domain each and every aspirant must deem about the activities and responsibilities of the job. This will not only help them understand the job responsibilities in a better way but will also provide them a golden opportunity to hone their respective skills to gain a cutting edge over the other when they land in the corporate world.

Corporate DevelopmentCorporate Finance
M&ACapital Investment
Alliances and partnershipsLiquidity management
DivestituresFinancing

Corporate Development Activities:

  1. M&A (Mergers and acquisitions): One of the crucial tasks of the corporate development department of any organization is to carry out the best possible M&A deals. Colossal corporate beasts acquire and merge with smaller businesses and firms to increase the cash flow of their business and incorporate the latest knowledge and skill set in their operational team. In simple words, large companies include different smaller companies in them to ameliorate their services. The primary and foremost task of the corporate development team is to deem about all the aspects of the deal. The team has to carry out granular due diligence of the target company with comprehensive research on their potential resources which will benefit the acquiring company. Aspirants must hone their skills at FM&V, risk management, and deal negotiation and management if they want to mark their presence in the market and grab a job in the corporate development department in some huge corporate beast.
  2. Alliances and partnerships: To spread the wings of one’s business in new sectors of the corporate market strategic alliances and sturdy partnerships are mandatory to maintain. Corp Dev team is responsible to research potential partners and alliances in the market and seek out an innovative methodology which will help to revamp the business models of all the partners in the relationship and will benefit all of them in some aspect.
  3. Divestitures management: It is crucial for the company to churn out some of the business assets and investment to minimize the risk and maximize the annual turnover. Corp Dev team plays a crucial role in managing the whole process from its commencement to the end. The team reviews the portfolio of the company minutely and decides to reduce the internal and external pressure by carving out some of the assets of the company.

Corporate Finance activities:

  1. Capital Investment: One of the vital tasks of the corporate finance department of the company. The team reviews the whole capital structure of the company and takes strategic measures and calculated risks to investing the capital in assets which will maximize the turnover of the company. Aspirants who aim to opt this domain need to be flawless in financial modeling and hone their skills in financial accounting tools.
  2. Liquidity management: Cash inflow is mandatory for any firm to carry out its operations seamlessly. The corporate finance team manages the whole process of finance management. The team has to maintain a proper log on all the short-term investments and assets of the firm to ensure enough liquidity so that all the operations are carried out smoothly.
  3. Capital financing: The chief task of the team is to take key decisions on employing the capital resources of the company optimally. The team must understand the capital structure of the firm and maneuver the resources in such a way which benefits their company.

Hiring trends

Corporate development

The department tends to hire experienced personnel which includes financial managers and candidates with high deal experience in different deals in banking and investment market.  Financial managers generally have an experience of 2-3 years and have a lot of experience in carrying out the best possible deals for the firm. The salary rise comparison with the work experience is given below.

Corporate finance

The department tends to hire new task force and generally prefer to employ undergraduates with high managerial and leadership skill set. They tend to incorporate the new and innovative brains in the department to revamp their business models with the latest technologies and tools available in the market. The salary rise comparison with work experience is given below

In a nutshell

Corporate development work mostly depends on deal activity. As the firm strikes for more corporate deals the workload on the team increases. On the other side in the corporate finance department, most of the workload constitutes monthly reports on the financial structure of the company. Aspirants need to deem about all the aspects of both the domains before opting for any career option. Plot your short term and long-term goals comprehensively and plan your strategies according to it.