Buy-side Advisory - Signage & Display Fabricator
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Client
The industrial investment arm of a large, listed company in the UAE - assistance in acquiring a minority stake
Assignment
Approach
Business Benefits
Bottomline
The Client directed us to handle an approach by the seller of an attractive-looking Target offering a significant minority stake for circa AED 25-30 million. Under the mandate, IdealCap was to conduct the whole buy-side process through to completion.
During the information gathering phase, we observed that the information flow was rather slow with no ostensible explanation; what was submitted was incomplete and inconsistent. Further, during meetings with the Target's staff, we noticed certain behavioral aspects that caused us concern. Also, the high-level assertions of the Seller and his managers as to revenue contracts could not be supported by the Target and an aggressive year-end outlook was submitted (presumably to support a high valuation for the Target) without a factual basis for the projections. The lack of governance and transparency right from the early stages of the engagement raised serious concerns about the veracity and integrity of the operation.
Upon further enquiry, our suspicions were confirmed; we reported this to our Client and afforded the owner an opportunity to explain and remediate. When the owner's explanations themselves were short on facts and inconsistent, we drew up a statement of risks in an early memo to the Client. This resulted in the Client deciding to abort the transaction.
Our Client was able to avoid the time and expense of the acquisition process and more so, avoided the risk of loss from a significant investment in a dubious entity.
Three years on, the Target went into bankruptcy.