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Featured Case Study
The Exposition
Exposing The Risks And Upsides Of A Deal
Overview:
A mid-market private equity client was looking to conduct due diligence in support of a significant investment opportunity in the health sector.
A Medical Diagnostic Company required funding to establish two additional centres within the UK, and our private equity client wanted an independent investigation carried out on the financial affairs of the company, market and competitive dynamics, potential commercial risks, and any other information that may requiring a restructuring of the deal to reflect risks detailed in the due diligence report, or present potential pitfalls.
The Process: e-FM conducted a discreet but fully comprehensive investigation of the financial and commercial position of the company. The final report covered: · An in-depth review of the target company's operational financial matters, including available contracts and the impact on the viability of the financial plan, as well as underlying assumptions: The company's revenue model was thoroughly examined, paying particular attention to the projected selling price as well as service and customer mix.
The commercial viability of key contracts was also examined including sales contracts and a review of upselling opportunities, property and supplier contracts, insurance contracts as well as buy out terms of leasing agreements. A number of key issues were identified, including possible contract termination from a key customer resulting from the new investment, insufficient insurance cover, errors in the financial model and missed market growth opportunities.
· A detailed review of the company's balance sheets, current trading position and inconsistencies with the financial model: A thorough analysis was carried out on asset valuation, debtor concentration, recoverability issues and calculation of working capital requirements. · A comprehensive review of its operational tax matters with a view to identifying whether a specialist report is required: Focus was on PAYE, VAT, Corporation Tax, share option reporting as well as pending inspections: A significant structural issue was identified impacting tax burden and efficient operation of the business.
· A review of the corporate structure and compliance, identifying some corporate governance issues with a minority shareholder.
· A review of the financial model for accuracy, adequacy of assumptions and application of agreed sensitivities to the key financial data. Key issues identified included some significant high risk assumptions, costs not adjusted for new legislative matters such as pensions, auto-enrolment and the increase in employers NIC as well as cash mis-stated due to terminated payments being overlooked. · A list of key findings, observations and recommendations, as well as a conclusive analysis explaining the feasibility of recommendations and the impact on the company.
The Final Report & Value To Client:
The fully comprehensive report presented to our private equity client showed that the underlying profitability- allowing for various factors including the pricing and customer mix, suggested that profits could be riskier and lower than had originally been presented, and that cash availability may become an issue as the second new centre was opened. Opportunities highlighted in the report also enabled our client to gain a better understanding of the target's business and understand the basis of their forecast and underlying assumptions. This knowledge enabled our client to make a more informed investment decision, place them in a better negotiating position and led to an improvement in the terms of our private equity client, including a restructuring of the deal to reflect the risks and the opportunities presented. In conclusion, a very happy client, as well as a happy investee company that had received a number of commercial ideas and insights from the process!
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Our Locations
Richard Keighley FCMA
North Lincolnshire
richard.keighley@efm-network.com
Martyn Hodgson CA
West Yorkshire
martyn.hodgson@efm-network.com
Jonny Goldblatt FCCA
Manchester
jonny.goldblatt@efm-network.com
Stephen Clough ACA
South Manchester
stephen.clough@efm-network.com
Charles Griffiths FCA
Winchester
charles.griffiths@efm-network.com
Dennis Kilbey FCA
Essex
dennis.kilbey@efm-network.com
Errol Henry ACMA
Surrey/ London
errol.henry@efm-network.com
Trevor Ballard FCMA
Worcester/ Birmingham
trevor.ballard@efm-network.com
Steve Masters
Halesowen
SteveM@efm.uk.com
Maurice Scott FCMA
Manchester
maurice@efm.uk.com
Graham Baskeyfield FCCA
Luton/ Home Counties
graham@efm.uk.com
Malcolm Holloway FCA
Newcastle
malcolm@efm.uk.com
Gary Jesson FCA
All regions/ ROTW
gary@efm.uk.com
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Greetings!
Welcome to e-Financial Management, providers of pay-as-you-use financial management solutions.
Finance Directors Richard Keighley FCMA, Martyn Hodgson CA, Jonny Goldblatt FCCA and Stephen Clough ACA have joined the eFM network bringing our team to over 30 and our financial management services closer to clients and prospects.
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Companies Under Scrutiny
A few weeks ago, it came into light that the government's Insolvency Service had launched a court action and commenced director disqualification proceedings against 9 high profile directors of Farepak. There was a lot of media interest in the collapse of Farepak as up to 123,000 families were affected by the total loss of circa £42 million, and the news was widely reported.
The incident served as a warning to prominent directors and business owners that in addition to smaller companies, the Service could investigate blue chip companies and prominent businessmen- an uncommon practice in the past; as larger companies seemed to benefit from an undisclosed immunity.
Every director is subject to a number of statutory, common law, and regulatory duties and any default could result in civil liability, criminal prosecution and director disqualification. Informal appointments and resignations do not exempt directors from these penalties, as a prosecutor or claimant only needs proof of directorship to progress with a case.
It can become hard to juggle all of the corporate responsibilities of a director, and this is even more of a significant problem where there are harsh macro-economic issues, internal cash problems or pending investment decisions to deal with.
If you are at the point where you are worried about penalties, your financial situation, or are seeking specialist finance director input, consider speaking to us about a temporary non-executive director, a finance director or a finance specialist with a holistic approach. For more information, please reply to this newsletter or mail us at chinwe@efm.uk.com . For benefits of our financial management services, click here http://www.efm.uk.com/outsource.php |
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e-FM Launches Its Financial Diagnostic Due Diligence Service!
Do You Know Everything You Need To Know?
e-FM has just launched an in-depth financial director diagnostic/ due diligence review for non execs and funders on target companies. This comprehensive investigation provides a fully detailed report on all major financial aspects of the company, supplying potential investors, funders and non-execs with information that will enable the validation of claims made by management of the businesses and reveal potential pitfalls or missed opportunities of proposed plans.
The report will include a list of key findings and valid recommendations, as well as a detailed conclusion with a financial analysis explaining the feasibility of our recommendations, and its impact on the company.
We can also propose a plan where your company can gradually implement our recommendations over a transition period.
For more information, please reply to this newsletter, or click here Financial Diagnostic Due Diligence
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AWR- Increased Liabilities For Employers
The Agency Workers Regulations (AWR) are due to come into force on the 1st of October 2011 and this law may impose increased liabilities and compliance on the employer, even though the onus will be on the agency to ensure that employers are compliant. Over the last few years, fast growth companies have increased their use of temporary workers to fill short term staffing gaps, respond quickly to temporary increases in demand, and manage projects which do not require long term commitments.
As the current law stands, a large percentage of permanent workers have more employment benefits and entitlements than their colleagues who are temporary workers. To protect agency workers and temps from exploitation, these rights will cover working conditions and employment terms relating to working hours, remuneration, holiday entitlement, training support and job assignments, amongst others. As the implementation day approaches, many companies have started to rethink their recruitment strategies, asking themselves if their current recruitment model is cost-effective and sustainable.
This controversial directive has in the past been opposed by some organizations claiming that the legislation will result in huge job losses, leaving the workers in a more vulnerable situation; as well as hindering flexibility in the industry. The new regulation will lead to some major adjustments in the way people utilise temporary resource. Non-employed individuals are engaged in a number of ways and the category under which they fall will dictate whether or not they need to address this as a major issue. Contractors, self employed and managed service arrangements will fall outside this legislation and therefore the use of individuals within these categories will not result in any additional expense for the business, generally speaking, as these would fall under IR35.
If you are unsure of your status, speak to a legal adviser and if you need to address your recruitment options, speak to us as we have finance specialists up to director level. For more information about how e-Financial Management (e-FM) and Interim Management Talent Bank (IMTB) support growing businesses, and how we can support yours, mail us at chinwe@efm.uk.com |
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Our Next Discovery Day
With over a decade of providing financial management services to clients, we are currently expanding the network via our licensing model. The network has since last year, welcomed ten finance professionals to the company. We provide an entire business in a box and you get an incredibly flexible lifestyle with additional revenue generating opportunities from our partners. You may decide to work at any level from bookkeeping to Financial Director for as many days as you find appropriate. To find out more about our offer and the benefits of joining the network, please visit our new network site: www.efm-network.com
If you would like to attend our next Discovery Day, or find out about future events, kindly contact us by replying to this newsletter or email james@efm.uk.com for bookings
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Late Filing Penalties From The 19th Of May
 There are a few changes affecting Employer Annual Returns and Starter and Leaver PAYE forms this season.
All employers who send their Employer Annual Return to HMRC after the 19 May filing deadline will now receive a late-filing penalty. This includes a P14 for each employee and a P35 summary sheet. Previously, an extra-statutory concession gave employers extra time before HMRC charged a penalty, but this has been withdrawn.
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IMTB And The Interim Brands
Parental leave entitlements have now been reviewed and finding appropriate and cost effective cover is difficult for many employers.
For professional maternity and sickness cover, or specialist project work, speak to us about your interim management needs and we will shortlist suitable candidates with relevant industry experience. All charity clients get 15% rebated back. We know that with the extra 2.5% to HMRC in VAT this year, charities are probably the hardest hit as they are not always able to claim back VAT on purchases.
To find out more about our solutions and how we may help your business, please reply to this newsletter or mail us at chinwe@babyinterims.com . You may also get some fantastic deals through our affiliate programme on www.babyinterims.com . We have a comprehensive list of relevant providers that offer almost everything you will need from before a baby arrives to when the baby grows. To purchase a product or find our more, please click here: http://www.babyinterims.com/linkspage.php
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Potential For Making Savings- Small Business Rates Relief
The temporary increase in Small Business Rate Relief (SBRR), which was due to end on the 30th of September has now been extended for another year.
The Valuation Office Agency (VOA) gives all business and non-domestic property in England and Wales a rateable value. Rateable value is a professional assessment of the annual rental value of a property on a specific date. For most properties, such as shops, offices, warehouses and other industrial property,evidence of actual rents being paid for similar properties in the area is used to assess rateable values. For other types of property, such as pubs and other licensed premises, reference is often made to the business receipts being achieved to gauge the level of 'fair maintainable trade' that might be expected, using this as the basis for the assessment of rateable value
Small businesses may claim relief for business rates below £12,000. For rateable values below £6,000, no rates are due, and for values between £6,000 and £12,000, ratepayers receive tapered relief, but claims must be made before any relief is granted, as the benefits are not automatic.
If you are already benefitting from this scheme, please pass on these notes as the potential to make savings is obvious and for many who provide support to ratepayers, this will generate additional income for the business. Business rate bills have been issued so it's worth checking to see if your property has a rateable value below £12,000.
For more information, please reply to this newsletter.
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