New service looks ‘under the skin’ of acquisition targets

A NEW service, which offers to ‘look under the skin’ of acquisition targets, is being launched in Yorkshire.

Harrogate-based Navigoes hopes to improve the return to investors and shareholders from both new acquisitions, existing investments and refinancing by carrying out what it calls operational due diligence.

According to Tom Jamieson, one of the firm’s founding partners, the unique approach evaluates the processes and the people within the company, which are captured in the form of operational commitments that the management team need to address in the same manner as financial convenants.

The service is not designed to replace traditional commercial and legal due diligence but enables better integration and shareholder value.

“More than 70% of acquisitions fail to generate the expected return to shareholders the rewards for success are substantial,” said Mr Jamieson, who has more than 20 years experience running companies.

“We have seen from our current clients, our research, and the condition of the economy that the existing investment process has to change. Our approach is giving control back to the investors and the buying teams allowing them to truly see what they are buying or investing in.”

Despite its infancy, Navigoes has already built a nationwide client list consisting of a number of leading banks, venture capital firms and corporates.

Mr Jamieson said that as far as he was aware no one was offering a similar service, which he predicts will become the norm post the credit crunch.

“Investors want to better manage risk and are looking for more certainty. It’s like buying a second hand car. You would want to take a test drive and even get a report done by a motoring organisation to make sure you were getting a good deal. Buying a company should be no different.”

Mr Jamieson said that operational due diligence for one client revealed that sales for the year were 26% down on plan, that the sales director couldn’t provide a coherent sales strategy and that the refinancing sales forecast included 37% of sales not yet known.

“Banks want to lend but the climate is a lot different now following the credit crunch,” he said.

“Investors want more visibility. We offer them that.”