A business case of how the dVT Group conducted a due diligence exercise to help this confectionery business
with the strategy and finance to purchase a number of small businesses, which allowed them to obtain a
larger share of the market.


Situation:

A client was referred to the dVT Group looking to purchase a small confectionery business and looking for
the finance to help with that purchase. After a number of discussions, it was apparent that the type of
finance they were looking for was going to be difficult to source with a limited business. We were able to
set the client’s sights further and change the business plan to aim for a much larger share of the market
by combining the purchase of a number of small businesses.

Actions:

The targets were identified and approached and equity funding was sourced from a major banker, with
additional debt funding from other financiers.
As part of the requirements of the financiers, and as part of normal prudence and care, a formal due
diligence program was developed for each of the potential acquisitions. This program required an
appropriate team of specialists within the dVT Group, and other members of our acquisition team, to
carry out due diligence on a number of areas including legal, taxation, financial and operational.
The due diligence confirmed that the companies had operated financially in the manner in which they
had presented themselves, so there were no concerns there. The business had substantial plant and
equipment, however had reduced their repairs and maintenance expenditure over the past few years.
This highlighted a risk, that any incoming purchaser might be required to spend considerable money in
getting the equipment to an acceptable level.
The due diligence also revealed that one of the companies had been perhaps less than totally
forthcoming in their taxation returns for many years, leading to a possible threat against the company
relating to tax liabilities.

Outcomes:

The purchaser was able to negotiate a purchase figure that reflected the need to invest further capital
expenditure over the next few years to ensure the financial results were maintained. The purchaser also
acquired the businesses, not the companies, and so reduced the risk of any threats from past actions by
those companies.