Mr. Bukhari
Scenario 4: A bridge too Far
Over a number of years, Seancon Ltd has adopted an aggressive growth strategy via targeted acquisition together with an organic growth plan. Seancon Ltd and its numerous subsidiaries are fully owned by Cainmich public limited company.
The opportunity recently arose for seancon Ltd to make an acquisition which would transform the business in regard to geographic exposure, revenues and profits and move the company’s position of being a top five player. The target company was a Caanja Ltd and its various subsidiaries. When the proposed acquisition was presented to the parent company, it received a very warm response and the parent company agreed to provide the necessary financial support to make the acquisition happen.
During the negotiation process issues arose surrounding management structure, Value and due diligence. While you had concerns there was nothing tangible that you could point to.
While your concerns were noted by the board and minutes, parent company and other board members were keen to proceed with the acquisition. A deal was concluded with adequate warranties and indemnities but the new board and management is heavily weighted towards the acquired business—a cost parent company was willing to pay for the prize of concluding what, on the face of it, looked a very attractive acquisition.
Post completion the problem started to emerge and the lack of data provided in due diligence reflected the fact that it either didn’t exist or was at best incomplete.
The timing of the acquisition meant that the preparation of the year end group accounts for Seancon Ltd included the last few weeks of the new acquisition. It became clear that we would need to disclose our finding to our auditors, as for some of the acquired companies, there were incomplete accounting records and incorrect exchange rates had been used historically for converting foreign exchange transactions and the year end balances.
In short the preparation of audited,
Over a number of years, Seancon Ltd has adopted an aggressive growth strategy via targeted acquisition together with an organic growth plan. Seancon Ltd and its numerous subsidiaries are fully owned by Cainmich public limited company.
The opportunity recently arose for seancon Ltd to make an acquisition which would transform the business in regard to geographic exposure, revenues and profits and move the company’s position of being a top five player. The target company was a Caanja Ltd and its various subsidiaries. When the proposed acquisition was presented to the parent company, it received a very warm response and the parent company agreed to provide the necessary financial support to make the acquisition happen.
During the negotiation process issues arose surrounding management structure, Value and due diligence. While you had concerns there was nothing tangible that you could point to.
While your concerns were noted by the board and minutes, parent company and other board members were keen to proceed with the acquisition. A deal was concluded with adequate warranties and indemnities but the new board and management is heavily weighted towards the acquired business—a cost parent company was willing to pay for the prize of concluding what, on the face of it, looked a very attractive acquisition.
Post completion the problem started to emerge and the lack of data provided in due diligence reflected the fact that it either didn’t exist or was at best incomplete.
The timing of the acquisition meant that the preparation of the year end group accounts for Seancon Ltd included the last few weeks of the new acquisition. It became clear that we would need to disclose our finding to our auditors, as for some of the acquired companies, there were incomplete accounting records and incorrect exchange rates had been used historically for converting foreign exchange transactions and the year end balances.
In short the preparation of audited,