Importance Of Thorough Working Capital Analysis

Working capital importance ,[object Object],[object Object],[object Object],[object Object]

Contents ,[object Object],[object Object]

Importance of WC due diligence Risks and rewards WC issues can significantly impact your client’s ability to create or protect value You are well placed to advise your client on such matters, whether we are on the buy side or sell side, in such a way that can give them a real cash benefit Working capital issues are key drivers of the cash flow forecasts and projections ,[object Object],[object Object],[object Object],[object Object],[object Object],[object Object],[object Object],[object Object],[object Object],[object Object],[object Object],[object Object],[object Object],[object Object],[object Object],[object Object],[object Object],[object Object],[object Object],[object Object],[object Object],[object Object],[object Object],[object Object],[object Object],[object Object],[object Object],[object Object],[object Object],[object Object],[object Object],[object Object],[object Object],GET IT WRONG “ Destroy value” ,[object Object],GET IT RIGHT “ Add value” What are the risks/rewards? ,[object Object],[object Object],[object Object],[object Object]

Importance of WC due diligence Typical WC considerations The importance of WC should be considered in context of the transaction as a whole The adjacent points should be considered at the planning stage GENERAL POINTs FOR CONSIDERATION ,[object Object],[object Object],[object Object],[object Object],SPA ,[object Object],[object Object],Funding ,[object Object],[object Object],Materiality ,[object Object],[object Object],[object Object],[object Object],Definition ,[object Object],[object Object],Users of the report ,[object Object],[object Object],IFRS ,[object Object],[object Object],[object Object],[object Object],[object Object],[object Object],[object Object],General issues

How can you add value to your clients? Feeding into our client’s process To add value you must integrate the scope and findings with your client’s transaction process and key hypothesis KEY FOCUS KEY FOCUS ,[object Object],[object Object],[object Object],6. Financial models ,[object Object],[object Object],[object Object],[object Object],[object Object],5. Processes ,[object Object],[object Object],[object Object],[object Object],4. Funding ,[object Object],[object Object],[object Object],[object Object],3. SPA adjustment/ completion mechanism ,[object Object],[object Object],[object Object],[object Object],2.SPA - WC definition ,[object Object],[object Object],1. Price negotiations

How can you add value to your clients? WC and SPAs As part of an SPA, a WC definition and adjustment mechanism may be necessary You may assist your clients with agreeing the WC mechanism, the definitions, the pro forma statement and the completion accounting ,[object Object],[object Object],[object Object],[object Object],Pro forma WC statement ,[object Object],[object Object],[object Object],[object Object],[object Object],[object Object],[object Object],Normalised WC definition in SPA ,[object Object],[object Object],[object Object],[object Object],When will it be appropriate to include a mechanism in an SPA?

How can you add value to your clients? Normalised WC - considerations There are a number of considerations which can impact the assessment of normalised WC on the date of completion ,[object Object],[object Object],Sustainability ,[object Object],[object Object],[object Object],[object Object],[object Object],[object Object],[object Object],[object Object],[object Object],Distortions ,[object Object],[object Object],[object Object],Peaks, troughs and seasonality OVERVIEW ,[object Object],[object Object],[object Object],[object Object],[object Object],[object Object]

How can you add value to your clients? Definition ,[object Object],[object Object],[object Object],[object Object],[object Object],[object Object],[object Object],There is no standard definition Each business and industry sector is likely to have a different set of components making up WC and different issues ,[object Object],[object Object],[object Object],[object Object],[object Object],[object Object],[object Object],[object Object],[object Object],RETAIL ,[object Object],[object Object],[object Object],[object Object],[object Object],[object Object],[object Object],[object Object],[object Object],[object Object],[object Object],[object Object],[object Object],[object Object],[object Object],[object Object],[object Object],[object Object],[object Object],[object Object]

Planning WC analysis Example WC hypothesis to be tested The hypothesis approach is a useful way to ensure our work focuses on our client’s key concerns KEY HYPOTHESES TO BE TESTED ,[object Object],[object Object],[object Object],[object Object],[object Object],[object Object],[object Object],[object Object],[object Object],[object Object]

WC considerations and pitfalls There are a number of common considerations and pitfalls across most transactions GENERAL ,[object Object],[object Object],[object Object],[object Object],[object Object],[object Object],[object Object],[object Object],[object Object],[object Object],[object Object],WC CONTROLS ,[object Object],[object Object],[object Object],MODELLING AND FORECASTING ,[object Object],[object Object],[object Object],[object Object],INVENTORY/WIP ,[object Object],[object Object],[object Object],[object Object],[object Object],[object Object],[object Object],[object Object],CREDITORS AND ACCRUALS ,[object Object],[object Object],[object Object],[object Object],[object Object],[object Object],[object Object],[object Object],[object Object],DEBTORS AND PREPAYMENTS ,[object Object],[object Object],[object Object],[object Object],[object Object],[object Object],[object Object],[object Object],[object Object]

Importance Of Thorough Working Capital Analysis

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