Feature


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Looking before you leap will pay dividends when purchasing a business, says Andrea Kirkby.


Due Diligence W


e are always told you should never look a gift horse in the mouth: The reality, for any agency making an acquisition,


is rather different though. The better the deal looks the more important it is to do your due diligence; checking that the business is worth what is being paid – looking for risks and potential pitfalls and ensuring you know exactly what you have paid for. James Trimble, New Franchise Director at


Winkworth, says that even though the agency franchises rather than acquires, he still has a detailed due diligence process. Trimble says, “We want to make sure that a step forward isn’t taking us into the danger zone – and we’re not prepared to compromise on the quality of our business.” Nine out of Winkworth’s eleven openings last year were conversions – existing businesses rebranding as Winkworth. Financial due diligence is crucial and often difficult. Dorian Gonsalves, CEO of lettings


22 l June 2012 l TheNegotiator


specialist Belvoir, warns that just asking for a set of accounts sometimes gets a poor response. “We’ve been approached in the last week by two guys with 150 properties,” says Belvoir; “but they couldn’t produce any figures at all, no revenues, no profit, no balance sheet, nothing.” If accounts are forthcoming, the business needs to be checked in detail. Belvoir checks the property management system for any outstanding items, and checks the rent roll. Sometimes this catches problems


immediately; one office did not have any of the client’s deposits, and a month and a half of the rent roll was also missing. Trimble says the accounts also need to be


checked against the VAT returns, to make sure the tax has been properly paid. He studies at least three years’ of sales returns. Trimble says, “We want to make sure revenue isn’t like a rollercoaster, or just a single year spike.” He also wants to be quite sure that “nothing has been paid under the table”. The cost base needs to be checked to


“We want to make sure that a step forward isn’t taking us into the danger zone – we’re not prepared to compromise on


the quality of our business.” James Trimble Winkworth


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