Advisory on the Purchase of a Large Secured Portfolio
A multinational alternative investment management firm based in 5 locations around the globe.
A large sale of secured asset portfolios and associated legal entities
To help the client determine a fair price and future strategies to collect upon the secured asset portfolios
The Quantum Approach
- Financial – To ratify and provide an independent view on Estimated Remaining Collections (ERC) as well as modelling future monthly revenue across a variety of scenarios using the Quantum Valuation Process (QVP)
- Due Diligence – Compliance – The testing of agreement availability and the legality of historical terms and conditions.
- Due Diligence – Operations – The testing of (seller) internal customer segmentation, tracing capabilities and external data usage.
- Due Diligence – Legal – The monitoring of customer accounts going through a legal process in relation to the secured asset or indemnity claims relating to the asset purchase.
- Customer Segmentation – A comprehensive segmentation of customers, not performed by the seller, to determine likely contact and collectability after purchase.
- Bid Scenarios – A QVP output tailored to the likelihood of various cash streams being realised within the investment horizon (paying customers, non-paying customers, customers in a legal process and customers not located)
Challenges: Our Client wished to purchase a large portfolio of assets and associated servicing companies. The secured assets to be sold were all at different stages of the account lifecycle (current, in arrears, shortfall) and across different product types (commercial, BTL, residential). The total investment value of this sale was in excess of 1 billion GBP.
Method: Quantum appended proprietary and specific customer data to the portfolio on receipt of the sale datatape to enable the segmentation of customers into specific risk groups. This segmentation drove a granular output from the QVP and ensured that due diligence was performed looking at high risk groups of customers.
Due diligence proceedings demonstrated that not all essential data items were made available to bidders. These data items were used to determine the lag in the receipt of cashflows from different customer types and strategies, without which a future cash flow could not be accurately forecast.
Using our proprietary technology, Quantum provided a variety of bid scenarios to our client based on the probability and timing of asset liquidation. QDA also supplied high-level details concerning future strategies to enable our Client to locate customers, calculate affordability and liquidate assets where the Target could not make contact.
Outcome: Due to the flexibility of the Quantum Valuation Process, QDA were able to generate granular monthly cashflows for each asset segment and deliver a variety of bid scenarios to allow our Client to get comfortable with any potential investment strategy. Thanks to QDA input, our Client gained exclusivity shortly afterwards to complete the deal.