Accuracy

CLIENT SERVICE » SOLUTIONS » Projects, Advisory & Disputes

Our solutions in a transaction context

Situation

Sale or  acquisition of a business that delivers major capital expenditure projects or programmes.

Industries include construction and infrastructure; transport; energy (renewables / nuclear / oil and gas), manufacturing; mining; aerospace & defence.

Accuracy by your side


-          Pre-transaction support

We perform due diligence on buy-side or sell-side targets and provide you with the information necessary to make an informed decision. Specifically we: 

  • analyse past order book performance and margins to measure a target’s ability to sustain its activity and counterbalance investment cycles.
  • analyse the current order book and plausibility of the anticipated margin.
  • examine profitability over time, (i) focusing  on and prioritising main projects that contribute to gross profit margin; (ii) comparing annual contribution and  identifying variances between gross profit margin and anticipated margin at completion; and (iii) analysing the structure  and composition of overhead and central costs.
  • assess  historical cash flow movements and funding requirements, especially those related to advance client payments, in order to determine the present value of future cash flows.
  • investigate incremental cost changes that are not captured in quarterly and annual financial reports. This includes the volume and nature of provisional risks and contingencies that are expected for project delivery.

Following a preliminary assessment phase, you will have the  information  necessary to make an initial offer or to reach a decision with your shareholders on timing and exit strategy.

-           Transaction support

We perform due diligence that is tailored to your needs whether the transactions involve targets that deliver or are involved in major capital expenditure projects and programmes. Our approach:

  • Obtain an understanding of the historical profitability margin over time.
  • Identify the most significant projects and investigate their risks and contingencies to determine with management, when feasible, if reasonable costs have been assigned to their budgets. We perform an analysis of individual project  costs and scheduled performance to date and assess the probability of  achieving final anticipated cost and date to completion.
  • Analyse the order book and compare between anticipated and past profit margin performance.
  • Challenge the business plan’s robustness and identify live  project risks and contingencies, both of which separately influence real book margins.
  • Determine adjusted debt amounts by assessing order book levels and cash flow fluctuation in order to establish the amount of recurrent client advance payments available to the business.
  • Quantify and measure the nature, volume and value of contingencies to guarantee business continuity.

Example: Vendor assistance


-           Post-transaction support:

Our work includes calculating earn-out clauses and drafting financial clause protocol.

We assist your lawyers in  drafting and preparing financial clauses that can be adapted  to project-specific requirements. For example, we assist in drafting the following:

  • clauses that define the types of commitments based on accounting assumptions, especially those in relation to project risks and contingencies.
  • earn-out clauses adapted to accepted recognition methods for project margins for final accounting purposes; and
  • suspension clauses related to order book entries.