Accuracy

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Case studies

Financial modelling and assistance in a bid process

Situation

  • Our client is a multinational group involved in an important competitive bid process (above 1 b€) launched by a state-owned company of a large developing country
  • The scope of the bid process is the following:
    • Build a new factory
    • Operate this new factory and sell the production to the state-owned company
    • Propose maintenance services for the products during a 15 year period
  • Main issues for our client are:
    • Impact of this project on its P&L, Balance-Sheet and Cash flows
    • Sensitivity of the project performance to various operational and financial parameters
    • Need to prepare a comprehensive financial fact book in order to negotiate with financing banks and potential equity partners

Our role

Our role comprised 4 steps:

  • Step 1: Prepare a financial model. Main issues are:
    • Collect data coming from various departments within our client’s organization
    • Ensure consistency of data on specific key operational and industrial issues (hourly rates, learning curve, cost of maintenance)
    • Estimate the costs of the new factory through external resources and internal benchmarks
    • Build a customized and user-friendly financial model, consolidating data coming from all departments
  • Step 2: Identify the main concerns in terms of accounting treatment and propose solutions. Main accounting issues were:
    • Revenue recognition
    • Expenses versus capital expenditure
    • Consolidation method depending on the stake held by the equity partner
  • Step 3: Identify, with the operational and financial teams, the key risks for this project (including local inflation, variation in exchange rates):
    • Prepare a sensitivity analysis to those risks
    • Define scenarios reflecting the most probable outcomes
  • Step 4: Prepare a financial fact book; assist our client in the discussion with the lenders and the potential equity partner

Outcome

  • Our client was awarded the project

Value added for our client

  • Ability to mobilize a multi-expertise team (with specialists in: financial modelling, construction contract, complex accounting, transaction support)
  • Ability of our team to deal with various departments within our client’s organization (financial department, legal department, M&A, business development, treasury, project managers, project cost controllers) at HQ and local level
  • Responsiveness of our team; ability to integrate quickly updated information and revised assumptions coming from our client