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Our first diligence work in a recent case identified a number of areas for improvement, with one of our key findings being an inadequate finance function. We often see smaller companies, who are starting to scale up, fall into this trap. Common features of such organisations include:
Such features were amongst those highlighted in our due diligence work. Our overriding message was that the company had essentially outgrown its existing finance function, increasing the level of risk from an investment perspective given the errors we highlighted in our report and the on-going impact. While the company had continued to grow, its finance function had fatefully stagnated.
Fast forward several months and having taken on board many of our recommendations, the company made an extremely positive turnaround during the second diligence work we carried out for their next round of investment. What had made the difference? The recruitment of a more robust and experienced finance duo (a finance controller and director) to shake things up.
In realising the impact that a weak finance function could have on inbound investment, the board prioritised improvement of the identified weaknesses at this most senior level and the finance pair have been regularly tackling the issues at hand ever since.
So how can the SME scale-up company of today prevent falling into this age-old trap? Sometimes all it takes is a long, hard look inwards: is your finance function sufficient for the future of your company? If not, be the one to take that first step in raising the issue and generate a plan for improving it, embracing the abundance of excellent part-time/interim finance controllers and directors available along the way.
Because we carry out diligence assignments on a regular basis, we can provide you with invaluable insight in order for you make informed business decisions. Whether included as buy side advice or for transaction services, our reports are tailored for each assignment, focusing on the key findings, any issues and our insight to present you with the information you need to know - saving you from labouring over multiple pages of detailed financial analysis.
Financial due diligence - investigating the financial aspects of the target business, highlighting key findings and potential deal breakers.
Tax due diligence - identifying any potential tax risks which could have an impact of the valuation of the target company. We evaluate historic tax computations, EMI schemes, employment related securities, PAYE and VAT and consider whether there may be any unrecorded future impact.
Lender assistance - evaluating both the historic and future financial performance and position of a borrower. We support before and during the provision and restructuring of finance as well as assisting with the monitoring process.
Vendor due diligence - working on both sides of a transaction, often tooling up a business before its sale. If you have a business with a £1million+ run-rate EBITDA and are considering a sale within the next 5 years, take a look at our Exit Pathway programme.
Whether you’re buying, selling or raising funds, we can provide you with a report that flags up any key issues before you commit too much time and money.
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Simon Wax
10 October 2018
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