Mazars’ due diligence team in Poole is used to working under pressure to meet client deadlines, as Chris Hodge, due diligence director at Mazars, explained to Tim Wickham.
As soon as two companies have hammered out terms for one to buy the other, the purchaser expects Mazars to analyse the business – the key numbers, as well as commercial and operational aspects – then report back without delay,
Chris Hodge describes a due diligence report as a bit like a homebuyers survey. Having had the sales documents from the vendor, the aim is to really get under the skin of a target company so the acquirer can make a more informed decision on its financial position, future prospects, and ultimately the terms on which it would like to proceed with the deal.
“We work collaboratively with the client to set the scope of our work. The report doesn’t explicitly say buy or don’t buy, but we do provide clear opinions and perspectives based on what we find,” he said. “We hold a lot of discussions with the target company’s management team to get a deep understanding of their business, what makes it tick, what are the key drivers of profits and cashflows and what we consider are the key potential risks for achieving its forecasts.”
Last year was a record for Hodge and his four-strong due diligence team in Poole with 14 successful deal completions with a combined value of over £450 million. They are currently tracking ahead of their growth target for 2018.
For Hodge, attention focuses, in particular, on maintainable EBITDA and understanding working capital levels. “This is because key points for a buyer to avoid include paying on multiples of a profit that might include a one-off event, or finding that working capital levels, and hence cash, are abnormal at completion” he pointed out.
Mazars provides its clients with in-depth analysis in its due diligence reports. These answer the ‘so what?’ questions about the numbers it has crunched. “We report our factual findings and also give our perspective on them, saying how they could affect things like the purchase price or strategic opportunities or priorities post-transaction. These are key areas where we add value to our clients,” said Hodge.
As well as offering its detailed perspective on a deal, Mazars also gives clients access to the benefits of its commercial expertise. Due diligence teams are always led by a partner or director. “This ensures that clients benefit from the depth of our deal making experience and one of the most satisfying things for me is when clients say that our report provides them a template for their post-deal planning,” he said.
The Mazars team in Poole works closely with banks, lawyers, corporate financiers and private-equity providers on deals. Many of its due diligence clients are owner-managed, entrepreneurial businesses, typically in the £10m-£100m turnover bracket. Mazars has around 60 deal advisory experts across its 17 UK offices.
“That gives us the flexibility to scale up resources to deal with peaks in activity by using staff from other offices. It also means we offer expertise across a range of industry sectors,” said Hodge.
Around a third of the Poole office’s due diligence work is on international deals and Hodge observed that for now Brexit appears to be having “little impact” on deal flow.
Mazars has grown internationally, in the UK, and in Poole in recent years. Mazars has had a presence in the town for over 30 years. “Our Poole office has grown considerably and, following recent investments in the team and our new office, we are committed to the region. We’re proud to be the only top 10 accountancy firm in Dorset,” said Hodge.
The firm aims to lead the way in offering flexible, innovative and client focused services. These include elev8 by Mazars, its innovative client relationship offering, designed to support and nurture SME business through all stages of the business lifecycle, and its Optimize program which is designed to help entrepreneurial business leaders focus on the key drivers of success in their business and to optimise its long-term capital value.