Transaction Services

Overview

When a company is being sold or is selling off one of its parts, it needs to provide an independent in-depth report on its financial health to potential buyers. This is called vendor due diligence and is a comprehensive assessment of the business to be sold commissioned by the vendor at the beginning of the sale process and addressed to the purchaser.

Our vendor due diligence team provides comfort to both buyers (acquirers) and sellers (vendors) with an independent view of the business, encompassing its performance and prospects. Our service aims to address the concerns and issues that may be relevant to even the most demanding purchaser, and typically covers financial, commercial, tax, human resource, legal and IT matters. Both the seller and the buyer benefit from a vendor due diligence. The seller benefits because they are made aware of issues early on, and their management team will not be inundated with several potential purchasers. Furthermore, it provides vendors with greater control over the sale process and the timing of sale, which can, in turn, help secure a higher price for the business. The buyer will save time and costs of doing this diligence. VDD offers vendors greater control and positioning over the sales process and timing.

Issues you may be facing

• Your strategy involves maximising the saleability of your business, whether through a carve-out of business units, or by the sale of existing entities.
• You wish to retain control over the sale process.
• Your company is in the process of restructuring/re-focusing its activities.
• You want to reposition your portfolio focus on core businesses, or return value to shareholders.
• You have started to feel pressure from financiers as a result of deteriorating financial ratios.

How we can help

• Provide vendors with greater control over the sale process, information and the timing of sale, which can help secure a higher price for the business by minimising the uncertainty discount in bidders’ valuations.
• Provide purchasers with greater certainty over the nature of the business and the characteristics of its cash flow. This helps pricing decisions and the level of gearing the structure will support.
• Help manage expectations of all stakeholders.
• Provide insight and better use of time during the exclusivity phase of your sale process.
• Reduce disruption to the business as the sale process is more controlled.
• Minimise the need for ‘additional’ due diligence work.
• Controlled release of sensitive company information to short-listed bidders.
• Help add credibility to the facts, figures and information provided in the sales information memorandum and ability to address issues raised early in the process.
• Remove the necessity for a buyer to have substantial access to do their own due diligence work as they will be able to rely on the vendor due diligence report.
• Early identification of value critical issues, providing the option to "regroup and fix" outside the glare of publicity.
• Reduces uncertainty risk for financial buyers, potentially justifying higher offers.

Issues you may be facing

• Your company's strategy involves disposing of part of the business, whether through a carve-out of business units, or by the sale of existing entities.
• Your company is in the process of restructuring/re-focusing its activities.
• You want to reposition your portfolio focus on core businesses, or return value to shareholders.
• You have started to feel pressure from financiers as a result of deteriorating financial ratios.

How we can help

• Provide vendors with greater control over the disposal process, which can help secure a higher price for the business.
• Reduce disruption to the business as the disposal process is more controlled.
• Helps add credibility to the financial drivers and information provided in the sales memorandum.
• Vendor assistance specialists can ensure that the vendor retains pace and initiative throughout the sale process.
• Allows management early ownership of facts to address problems by providing the option to "regroup and fix" outside the glare of publicity.
• Rapid execution of the divestment from the point of announcement. This reduces the business disruption and accelerates transfer to new owners.

Issues you may be facing

• You are contemplating a deal and wish to consider the relative merits of the completion mechanisms (typically completion accounts or locked box) in the context of your transaction.

• You are making a disposal and wish to guard against price erosion by potential acquirers, both through the determination of the consideration to be paid and through the post-completion mechanism.

• You are making an acquisition and wish to ensure that potential 'debt-like' items and other financial risks have been identified and appropriately addressed through a completion pricing mechanism within the SPA, or through warranties and indemnities.

• The transaction being contemplated includes a post-completion pricing mechanism, and you are seeking to position the SPA to your advantage to minimise the opposing party's potential to influence the price.

How we can help

• We can assist you and your advisers in considering adjustments between Enterprise Value and Equity Value and in formulating arguments and counter-arguments required to justify your proposed approach.
• We can advise you in your determination of the appropriate financial benchmarks (or appropriate adjustments to price in the case of a 'locked box' (fixed price) mechanism) and related arguments, for the purposes of price negotiation and drafting the SPA.
• We can assist you in your analysis of the working capital requirements of the business with a view to you determining the normalised working capital for purposes of your negotiation of the SPA.
• We can work with you and your financial due diligence team to assist you in mitigating the risks identified during the due diligence phase. We can advise you in your negotiations of the accounting aspects of the SPA. Such advice would include commentary on the pricing mechanism, relevant representations and warranties (if any), any other accounting-related clauses of the SPA and any dispute resolution mechanisms related to the purchase price adjustment (including as appropriate, consideration of tax-related items).

For acquisition work, this would mainly include:

• identifying appropriate targets;
• raising finance;
• seeking to resolve valuation inconsistencies between vendor and acquirer; and
• making the deal happen.

In terms of divestitures, our work may include:

• divestiture strategy;
• planning and transaction execution;
• identification of potential investors; and
• assisting in the overall disposal process.