Business case
Our client, a leading company in the luxury industry, was considering acquiring one of its suppliers for strategic purposes, thereby vertically integrating its value chain, due to the limited availability of high-quality products on the market.
As with many industrial companies, one of the key aspects of this BSDD was to challenge the working capital modelled by Management, specifically the normalised level of inventory. Management believed its inventory level was above the typical level of activity and had not deteriorated over time. Additionally, the company’s financials included numerous intercompany flows, with some of the entities in the perimeter reporting under different accounting standards. We had to model the appropriate intercompany flows post-carve-out, with both in-scope and out-of-scope entities.
We prepared a buy-side due diligence (BSDD) report, which included a detailed analysis of the historical performance of the carve-out perimeter, an assessment of normalised profits and an analysis of adjusted net debt. We also conducted a comprehensive analysis of normalised working capital.