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“Companies can’t be valued on their fixed assets alone. A company might have the best equipment in the world, but if it’s not being used properly and the people running it aren’t motivated or well managed, it’s just scrap metal,” says Mr Howarth.

“Too many involved in M&A activity take a purely financial approach and fail to assess crucial operational or cultural issues. A good due diligence programme will identify every possible source of loss, such as redundant stock, excessive machinery downtime and unprofitable product lines, to give the purchasing parties a clear idea of how their potential investment is performing.  If done properly, an audit will asses if the business is working efficiently and exploiting its full potential and help create a plan of action to rationalise systems and streamline operations to increase profitability.”

OMS provides independent industry intelligence to companies that are buying, merging or going into partnership with other businesses. The firm also advises manufacturers that are investing in machinery and works closely with private equity and corporate finance professionals to support the deal making process.

“We’re helping companies decide if the business they are investing in is a viable asset, and if the price they are paying for it is fair and reasonable,” says Mr Howarth. “In more than two thirds of cases, we’ve successfully renegotiate deals based on evidence uncovered during due diligence.

“Hidden weaknesses in acquired or merged companies can lead to over-optimistic expectations and problems further down the line. Merged companies often take years to fully integrate because of problems that should have been pinpointed before the transaction took place.”

www.oms-ltd.com