Adjustments to the net worth of a real estate development group

Type: Post-acquisition litigation
Sector of activity: Real estate development
Size (sales in €m): 76

Context

The group is an integrated operator active in the real estate development business, investment in business premises and offices and on the campsite sector

  • The group signed a memorandum of understanding with a view to a tie-up with a group specializing in the management and operation of tourist residencies and hotels. The MoU provided for reciprocal shareholdings
  • The MoU stipulated that the group’s reference accounts should show net assets, on the transaction completion date, of a maximum negative amount of €0.85m, with a fixed timeframe for checking these accounts or have a consultancy firm do so
  • A financial due diligence report was prepared by a consultancy firm, commissioned by the buyer, referring to 15 adjustments to net worth, which increased the negative sum of €0.7m to a negative amount of almost €3m

Our mission

  • Understand the adjustments proposed by the consulting firm commissioned by the buyer
  • Review of the appropriateness of adjustments to net worth indicated in this report
  • Financial and accounting demonstration of the items to be adjusted
  • Assistance with negotiations

Results

  • Our report was used for price negotiations between the parties
  • Our report enabled the parties to agree on a negative net worth of €1.1m

Key success factors

  • Ability to analyze specific accounting issues
  • Exchange with the co-expert and the external auditor in order to present our position