Built environment — Buy side financial due diligence

Business case

Built environment — Buy side financial due diligence

Situation: Transactions

Others

Context

Our client, a global multidisciplinary engineering and consultancy group, was evaluating the acquisition of a UK-based construction consultancy operating across quantity surveying, project management and building surveying. The target had experienced rapid recent growth, driven primarily by public sector demand, particularly within healthcare (public sector infrastructure / NHS framework contracts).

The business operated a project-based model with a high concentration of revenue from NHS clients and long-term framework agreements. Financial information was historically prepared on an unaudited basis, with limited formal processes around revenue recognition, project tracking and financial reporting.

Key Takeaway

In project-based professional services businesses, financial performance is closely linked to judgement-driven processes such as revenue recognition, project tracking and working capital management. Where these processes are not fully embedded, there is a heightened risk of misstatement and volatility in reported earnings – particularly during financial due diligence and post-acquisition integration.

In this case, our analysis provided the client with a clear view of underlying performance and key risks, particularly around revenue recognition and customer concentration. It also highlighted the importance of robust transaction structuring — including appropriate definitions of working capital and net debt — to mitigate financial uncertainty and protect value.

Accuracy Role

We supported the client through a comprehensive financial due diligence workstream:

Assessed historical financial performance and key value drivers, including revenue growth, margin evolution and customer concentration, with a focus on project-based revenue streams and public sector exposure.

Performed a detailed quality of earnings (QoE) analysis, identifying key normalisation adjustments, including partner remuneration, one-off items and the impact of non-standard accounting practices.

Evaluated revenue recognition practices, highlighting reliance on management judgement, lack of timesheet data and risks associated with cut-off and profit recognition across reporting periods.

Analysed net working capital (NWC) dynamics, including the impact of advance payments from public sector clients and the resulting negative working capital profile (working capital inflow / cash conversion advantage), as well as implications for valuation, deal structuring and pricing mechanics.

Reviewed the business plan and underlying assumptions, challenging the robustness of forecast growth given the absence of a formal pipeline and reliance on high-level assumptions (including sensitivity analysis and downside scenarios).

Supported the client in identifying key transaction considerations, including net debt, working capital mechanisms and areas requiring protection within the SPA (Sale and Purchase Agreement), including presentations, warranties and indemnities.