Commercial Due Diligence for Lloyds Bank

Commercial Due Diligence on a £4bn international business group, to assess its suitability for a loan by Lloyds Bank, as part of an Independent Business Review led by EY Transaction Advisory Services (TAS)

Our Consultant who worked on this project: Cristina

THE MANDATE

Lloyd Bank asked EY Transaction Advisory Services (TAS) to provide plans and recommendations to evaluate and shape the debt refinancing and organisational restructuring of a prospective borrower:

a $4Bn privately-owned global engineering, construction, and assets management group, operating in the UK, Canada, HK, Middle East and Australia, investing, designing, manufacturing, delivering and operating private and public buildings, infrastructure and energy capital projects.

EY had to enable the lender’s decision making by providing debt and organisation restructuring advisory, and form an opinion about the borrower’s turnaround and future growth potential. For this last point, the EY Transaction Advisory Services (TAS) cross-sold EY Performance Improvement (PI) Services, engaging 12 EY PI Advisory management consultants at the Senior Manager and Director level.

Our Evolution resource, Cristina, was involved in the project in this contest, and her role was to provide support to the EY Performance Improvement team of 12 SMs and MDs level colleagues, starting with an assigned Market research regarding the industry of the prospective borrower: analysing the UK competitive landscape, construction market size and borrower’ share, growth and profit trends, prospects of recovery of the UK construction industry and other factors to assess the borrower’s turnaround potential.

THE SERVICE

After proving her capabilities and added value in her UK market analysis for the prospective borrower industry (validated directly by a director and by a consultant working at senior manager level) Cristina was tasked with other assignments in support of the team of 12 MDs and SMs, who were reviewing the client’s order books and their managerial accounting and operational reports, project by project, also interviewing the client’s senior executives who were responsible for these.

Her second assignment in support of the team was to prepare the executive summary of a report of several hundred pages, according to a summary structure provided by a director. These first pages of the report also included a summary of the risks, which she was tasked to identify by the director, so that the senior resources in the team could expand on them (focusing in particular on risks affecting timescales and margins, such as delays by subcontractor and suppliers, H&S, funding, market and economy down-cycles, talent shortage, bad behaviours in the borrower's organisation).

As part of the information to be provided to the lender, in order to evaluate the borrower financial recovery and solvency prospects, Cristina also reviewed and summarised information around the borrower's corporate strategy and IP assets: from their digital engineering designs to proprietary solutions for modular offsite assembly, innovation and automation.

Another direct director's assignment our resource carried out was the analysis of the pipeline of booked and closed deals for the borrower’s UK construction projects, segmented by client Tier (ranked by contracts value and volume and reliability, measured as past loyalty and length of business relationship). Additionally, a director tasked her with the analysis of the UK Government's public information concerning assigned and unassigned capital projects, to evaluate what share of those the borrower secured, and what share was unassigned and could be captured in future.

Finally, our resource carried out also ad-hoc minor tasks to free up valuable time for her senior colleagues: she cleaned their Power Point presentations and their graphs, printed reports, finalised the formatting of the client’s documents (which could not be outsourced as usual to external graphic service providers, given the borrower’s protection by NDA), produced analysis graphs in Excel and Think Cell, reformatted the RAG status by project (in order to reflect its continuous change after each EY leadership's revisions of the final report) and also checked the consistency of various formulas in use, adding value when she could find some analysis that was done with different formulas across projects, making the projects less comparable to each other, unless the formulas were changed to be the same.

THE BENEFITS

In terms of benefit to the client the delivery achieved the added value that Lloyds Bank expected, enabling the lender to evaluate positively the request of a bridge commercial loan by the applicant, and enhancing the borrower’s probability bringing private investors back to their table (considering also EY TAS’ proposed debt and the Group’s restructuring plans, which following the EY performance improvement's Business Review suggested divestiture of a geographically-defined business unit.

This advisory project also benefited the borrower, who thanks to the EY’s report, could raise its credibility in order to successfully refinance its UK business unit, closing about £60 million of new funds, new bonds and long term loans, from a consortium of banks.


In terms of benefits and value which our Evolution resource, Cristina, added to her team, according to her colleagues: she was able to prioritise the tasks given to her by a number of people, delivering ahead of her deadlines and easing also the quantity of hours for the more senior colleagues she supported.
She also added further value when in a couple of instances she did a quantitative-analysis check on numbers, in the drafting of a final report. For example:
When she was preparing the executive summary for the client’s report, she had to present key comparable data for all the lender’s projects and she noticed the formula to calculate net benefits by project wasn’t consistent among all the reports done by her senior colleagues for each project. She then flagged the inconsistency to a director, and the director emailed to the entire team a new formula to use consistently, so as to render the data comparable across all the projects and enable decision makers to form opinions and suggestions for the entire borrower's business.

Finally, according to another senior colleague of hers, Cristina added value also by asking probing questions (such as the request to provide the source of some data a colleague had asked her to use in the forecasted market analysis, or at least the logic for the growth ratios it was suggested that she use).

Additionally, according to various written comments, her whole team found her pleasant to work with, adaptable, resilient and hard working.

£4Bn GBP

Revenue of the prospective borrower the year its business was to review

£60m GBP

Borrowings risen thanks to their boosted credibility, due to EY's business review

36

Borrower's UK live projects with proprietary accounting methods, reviewed by EY

Snapshot of the perspective lender's industry, subject of the market analysis and research
Snapshot of the perspective lender's industry, subject of the market analysis and research
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What People Say

All 30 written comments regarding Cristina's work are evidenced in writing by their original MS Outlook files and a S.A.R. received via email, archived in its original delivery email.

“As a project manager Cristina has consistently worked at Senior Consultant level.

She has managed the rollout of our biggest process improvement project.

The training guide she produced for the process improvement project was excellent and will be a key enabler for the transition phase.

I have been particularly impressed with her analytical skills and her ability to break problems down into key components and identify workable solutions.

Her briefings have been well researched and to a very high standard.”

— Stuart Bourn, Managing Director at Ernst & Young LLP