Technical Due Diligence - bridging technical and commercial

Situation​

A private equity company with very little technical capability was investigating a potential purchase of a $2bln upstream drilling company. Decision making on this acquisition was in an extremely tight timeframe.​

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Task​

Frame and coordinate the technical due diligence, and then feed it into the commercial analysis to ensure the key issues and risks were appropriately represented. ​

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Action​

• Designed a programme for the technical workstream based on; (1) Designing a suitable framework against which to benchmark the target’s technical capability, (2) Develop a robust technical point of view based on available documentation, engaging with the target company’s leadership and visits to assets within the target portfolio, (3) Integrate all learning in a fit for purpose report to the client​​

Results​

• A small, focused team were mobilised at 1 week’s notice and interviewed target leadership and led site visits in 3 countries​

• The close out report contained clear statements on; ​

• Red flags: Anything with potential to derail the acquisition​

• Technical capability: Relative to peer group ​

• Material risks: Requiring client adjustment of their bid, or particular attention post acquisition​

• Capex/Opex profiles: A verification of the target company’s business plan​

Key Insight 

It is essential for technical insights to be structured and communicated effectively to financial colleagues​