Financial diagnostic analysis run on behalf of VC

Oct 19 2016

SECTOR:

Venture Capital

CONCERN:

A potential investor needed to validate claims made by client (target) company.

BACKGROUND:

A venture capital investor contacted EFM to provide a financial management diagnostic review ahead of a potential investment in a major social service company that provides professional services to a range of corporate and public sector clients across the UK.

CHALLENGE:

The client needed to validate the target company’s forecasts in the context of the commercial environment of the business, and a review of its trading position to ensure consistency with the forecast model. They also wanted to find out if there were any risks to future growth or any potential working capital issues as the business scales.

SOLUTION:

EFM conducted a fully comprehensive review on all aspects of the business that could have a material impact on either price negotiation or deal viability. Major recommendations were made following the due diligence process, including adjusting forecasts to reflect current trading activity and the improved current debtor collection profile. It also proposed the re-phasing of the forecast with regards to salary costs and new revenue lines and an update for current plans and actual activity. EFM also recommended increasing the mix of company’s own staff to freelancers wherever possible to improve margin (albeit losing some degree of flexibility, fixing a degree of costs and operationally putting pressure on the team to sell more core staff time) as well as implementing a proper time recording and utilisation system to track own staff and client profitability.

BENEFIT:

The client was delighted with the extent of the analysis carried out and the quality of recommendations and proposals made. The report significantly exposed several unexplored opportunities and led to an improvement in the terms for our client.

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