Expert financial advice for businesses and individuals.
Buy Side Due Diligence
In an environment in which competition for the right deal is strengthening, an acquirer needs to be certain that they can generate incremental value over and above the premium paid.
Due diligence gives acquirers comfort that they are paying the right price for the right asset, and involves a bespoke investigation of the target’s financial and operational performance and (importantly) future potential under new ownership.
Opportunities for improvements post deal are crucial, and whilst downside risks are the traditional focus of diligence, successful acquirers should also investigate (and estimate as part of their business case) any upside potential.
At Ballards LLP, we understand that financial due diligence is key, but also that operational due diligence is now an integral part of the value story.
- What do the cash flows from operations look like on a normalised basis?
- How does the business operate day-to-day and what is its cost base?
- How can the asset become more flexible adapting to constant internal and external changes?
- What upside opportunities exist and how does the business compare to peer performance?
Value to you
The purpose of due diligence is to drive post acquisition value for our clients. More specifically this means:
- Paying the right price for the future cash flows of the target business
- Operational and industry insight to give you an advantage in the acquisition process
- Cost reduction upsides that give downside protection if revenue growth fails to materialise
- Identification of areas of risk that may be outside your experience
- Identification of transaction issues that turn out to be deal stoppers or cause management teams to adjust unrealistic plans
Our buy-side due diligence service
We can help you……
Identify and validate value creation opportunities, and identify risks early.
- Ensure the financial fundamentals of the business are reflected fairly in the numbers
- Uncover potential issues that may impact the deal value before they arise (including financial and operational risks), and identify additional upsides
- Ensure clarity on the cost base and its drivers
- Provide independent review and challenge of management plans
- Assess the effectiveness of current operating processes and systems, including capacity / utilisation / efficiency / capex etc
- Identify and mitigate execution risk
- Identify any one-off or dual running costs
- Ensure risks are reflected in the deal valuation
Value creation focuses on increasing revenue in a sustainable way without sacrificing margin, whilst at the same time optimising the operating cost base.
In an uncertain political and economic environment, it is increasingly important for companies to find effective ways to enhance their top line growth. Traditional blockers and challenges businesses typically encounter are:
- Operating within a market that finds itself stagnant
- A business model that has not been kept relevant or up to date in the eyes of its customers and consumers
- Being overtaken by existing competitors or competitors new to the market. This can be particularly challenging when competitors bring new technology into the sector.
Identifying growth opportunities is approached in a structured manner:
- Updating the business model, technology, or approach
- Getting to market quicker
- Examining the options of ‘Buying’ or ‘Building’ and the associated benefits and subsequent opportunities
- Increasing effectiveness of sales process
- Examining new product opportunities and success rates
- Examining the route to past success
- Refocus management on realigned goals
- Prioritize areas of growth, new markets, and development
- Identify and assess growth opportunities
- Exploit and convert easy opportunities and ‘low hanging fruit’
- Lowering SG&A costs by streamlining processes, implementing shared services where possible, and delayering management
- Examination and lowering of fixed costs
- Reduction of procurement costs via scaled economies
- Improving cash forecasting and developing processes to release cash quickly
- Defined controls on capital investment and monitoring of benefits
- IT process improvement and cost reduction
KPI Performance Management
- Assess efficiency, quality, and timeliness of reporting processes and management input
- Evaluate how current KPIs compare to management and investor needs
- Analyse failures of KPIs to meet management and investor needs
- Identify the KPIs of most relevance across the company
- Analyse the issues impacting reporting speed and quality
- Establish effective reporting of the most relevant KPIs
- Outline hierarchy of reporting
- Ensure KPIs are reported correctly in updated reporting systems
- Implement and maintain identified changes in all aspects of the company to strengthen management reporting and use of KPIs
- Embed recurrent practices and standards within business
- Monitor and review performance
- Divestment to a trade buyer
- Divestment to a financial buyer, such as a private equity house
- An initial public offering (IPO)
- A carve-out to embark on a joint venture with other parties
- Exit readiness diagnostics
- Vendor assistance with the requirements of a buy-side due diligence
- Sell-side due diligence
- Portfolio analysis and strategic advice
- Financial and operational carve-out advice
- Organisation design
- Future-state and day one operating model design
- Help in making decisions to sacrifice speed or value to improve the other
- Identification of opportunities for value creation
- Planning and structuring for transitional services agreements (TSAs)
- TSA exit and transition planning
- Business closing issues including Day One readiness, treasury financing, accounting deconsolidation, management changes and relations with workforce
Is this relevant to my business?
This service is relevant to companies wanting to:
- Explore potential exit routes
- Maximise value potential on exit
- Prepare differentially for all potential types of buyer
- Perform specialist options analysis on portfolio businesses
- Carve out a business to operate independently
- Carve out a business to be sold
When might my business look at this?
The following could cause your business to look into our divestiture advice service:
- Retirement or moving-on
- Lack of information provided to investors resulting in a business being undervalued: in this instance, divestment could boost shareholder value
- Underperformance within a company or business
- Insufficient business models or requirements
- Need for capital, for example if bankruptcy occurs
- Need for higher investment for growth to continue
- Changing preferences amongst consumers
- Changes in competitors
- Change in government policy or regulatory requirements
- Scrutiny triggered by transformative acquisitions