Our transaction process helps companies make acquisitions, divestitures and strategic alliances, and access the global capital markets.
In each case, we have the same overriding objective: to ensure clients maximise the return on their deal.
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Discover how we can help you find solution to common transactions struggles.
Buy Side Due Diligence
Any organisation considering a deal needs to check all the assumptions it is making about that deal.
Due diligence provides peace of mind to both corporate and financial buyers, by analysing and validating all the financial, commercial, operational, tax, legal, IT, HR and strategic assumptions being made. It uses past trading experience to form a view of the future and confirms that there are no 'black holes'.
The components of the service are revenue, commercial and market due diligence, synergy validation, maintainable earnings, future cash flows and all operational issues, as well as deal structuring.
- You want to strengthen your company's core business by acquiring rival products that are almost identical in function/performance to your own;
- You need to build on your company's existing activities by purchasing complementary products;
- You want to purchase a company to gain access to its existing products in new markets, or to increase your customer base;
- You need to expand your company's current portfolio of products and services through the acquisition of new ones - potentially to provide a hedge against the movements in the markets in which the company operates; or
- You want to spread your company's market risk by purchasing a company providing similar products or services in another country.
Common Buy Side Due Diligence findings and impact on the Deal
- The Target's revenues and expenses are not normalised for material one-off non-recurring items, hence the financials do not reflect the sustainable performance of the underlying business. Adjusting for same usually results in a downward revision of the pricing;
- The Target revenue recognition policy does not align with IFRS, which if appropriately treated would have negatively impacted EBITDA;
- The Target does not have an appropriate organisational structure in place, and compensating for same can result in a downward pricing adjustment;
- The Target does not have a formal debtors provisioning policy in place and therefore overestimates the recoverability of trade receivables. This would be a pricing adjustment;
- Obsolete stock is not written off;
- Management does not have a robust business plan in place which incorporates its historical KPIs and progression;
- Where available, the Target's forward business plan does not take into account historical performance and inherent KPIs, and usually demonstrates a 'hockey stick' effect thus inflating its potential and pricing under a DCF valuation methodology;
- Capex and inventory forecasts are not appropriate and do not align with the historical trends, thus underestimating the Buyer's subsequent capital and working capital commitments;
- Customer contracts may be coming to an end shortly but forecasts still incorporate growth related to same;
- The business and client relationships may be highly dependent on key staff, and no provisions for continuity is factored into the pricing;
- Carve-out issues pertaining to certain non-core assets which may be transferred before finalisation of Deal are not considered from an accounting, tax or legal point of view. This can have a material impact on the pricing;
- The underlying business' value relies significantly on future performance and the pricing structure does not cater for same.
Vendor Assistance and Due Diligence
When a company is up for sale - or selling off one of its parts - it needs to show an in-depth report on its financial health to potential buyers. This is called vendor due diligence.
We provide comfort to both buyers (acquirers) and sellers (vendors) with an independent view of the business, encompassing its performance and prospects. Vendor due diligence aims to address the concerns and issues that may be relevant to even the most demanding purchaser. For vendors undertaking a disposal or selling off a part of their own business, vendor assistance provides bespoke solutions to assist you in successfully completing your divestments.
Our vendor assistance specialists work alongside company management and their lead advisers throughout the process, ensuring that opportunities and issues are understood and the correct steps are taken.
- 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; or
You have started to feel pressure from financiers as a result of deteriorating financial ratios.
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