Due Diligence

Sia Partners worked with a major international infrastructure investor to make an informed decision on whether to bid for an asset. 

Challenge

A large international infrastructure investor approached Sia Partners to assist with the acquisition of a European regulated electricity and gas network. The task involved detailed regulatory, operational and technical analysis of the business. The project also involved assessment of the local political environment and assistance with stakeholder management with regulators, legislators and management within the company.

The company to be acquired was going through a process of governance reform. At the same time a new regulatory regime was being implemented by a new regulator. Sia Partners was required to forecast the likely implications of these changes on the business and the impact on asset value. We also benchmarked the operational and technical performance of the business against other utilities and estimated the potential efficiency gains to be achieved following acquisition.

Approach

Sia Partners developed a three stage approach for this project. The first stage was a desktop pre-due diligence analysis where we assessed the market, the likely competitors, the opportunity, challenges and risks. This process is designed to allow the investor to decide whether or not it should proceed with the transaction. In addition to a detailed analytical report, Sia Partners adopted a red, amber, green assessment criteria to each element of this business. This highlighted performance in key areas such as asset management, customers services, operational and field staff, business services expenditure and capital programme delivery.

The deliverable from stage one was a detailed analytical report focussing on regulatory and governance issues, a high level management presentation and performance assessment review against each category.  As a result of this assessment the investor decided to proceed with the transaction.

Stage two involved preparing the client for detailed due diligence following the release of the Information Memorandum. This involved briefing potential funders and also engaging with the regulator to comment on proposed regulatory and governance changes.  Stage three involved the preparation of the detailed due diligence following the release of the Information Memorandum and access to the data room. A detailed report was prepared to substantiate the conclusions of stage one and highlight any further risks or challenges. This work was also used to assist with final valuation of the asset.

Results

The detailed independent assessment undertaken by Sia Partners allowed the investor to take the view that it did not want to proceed with the transaction. It was considered that the governance risks were too high and the uncertainty could not justify the valuation of the asset. This saved the client further transaction costs. The Sia Partners approach is to provide independent and impartial analysis to allow its clients to take an informed view. Our clients value this approach because we are not motivated by success fees or other incentives. We provide the detailed regulatory, operational and technical analysis to allow the client to make the correct decision.