Advisory on Acquisition of a European Target Business
A European private equity firm based in various locations across Western Europe
A servicer and purchaser of non-performing loans, located in Northern Europe
To help the client understand a niche Financial sector and the capabilities of the Target business.
The Quantum Approach
- Financial – To ratify and provide an independent view on Estimated Remaining Collections (ERC) as well as modelling monthly revenue across a variety of scenarios using the Quantum Valuation Process (QVP)
- Regulatory – To provide a view on national changes in regulatory compliance and its effect both operationally and financially on future business cash-flow.
- Investment – To assess current investment and pricing capabilities. Investment Committee terms of reference, pricing memoranda and cost/revenue forecasting capabilities.
- Debt Finance – To provide advice on debt financing covenants, necessary management information and stress testing.
Challenges: Our Client was facing a common problem, the potential acquisition of a target business servicing an eclectic range of receivables in a niche industry. An additional complication was the collection of non-performing loans across multiple geographies, all regulated by different national financial bodies.
The Target Company had a rich history in the collection of non-performing loans (NPLs) on a servicing basis but limited experience in the purchasing of loan books and calculating their future collectability
Method: Quantum devised an on-site workshop to determine the capability of the Target Business in several key disciplines and obtained data to calculate necessary business efficiency and customer return metrics. Subsequently, QDA deployed its Quantum Valuation Process to assist the client in defining the viability of the Target-supplied collection forecasts for each individual European jurisdiction.
As the deal progressed, Quantum were further engaged to give advice on the Target Companies planned strategic NPL purchases, assist with negotiations for debt finance provision and provide compliance consultancy to prepare for changes in national regulations in fee charging and interest application. The QVP process was again utilised to determine the economic effect of these regulatory changes across a variety of scenarios.
Outcome: Guided by QDAs data-led approach, our Client gained confidence in internal operational and forecasting abilities. The use of the scenario-based QVP model generated Estimated Remaining Collections forecasts, across a range of economic and regulatory situations, assisted with bid strategy and, ultimately, successful acquisition.