Property transactions in M&A deals - Don’t be the loser

Guest blog by CPA Associate Alps Group.

In the world of manufacturing, property is probably one of the most valuable assets –yet when a company disposal, merger, MBO or acquisition is on the table, thorough environmental due diligence is often not carried out and even less likely, is property due diligence.

It would be unwise to purchase a house without a survey, so why do so many businesses, on either side of a deal, make decisions without a thorough inspection of the land and the buildings involved?

Peter Alcock CEO of Alps Group explains: “There are so many potential pitfalls concerning property and estates as part of a corporate transaction yet these assets are often dealt with as an afterthought, if at all.

The consequences can be expensive if not disastrous.  Land included in the sale could be highly contaminated and very costly to clean, the cost of which should be deducted from the price to be paid, but without thorough due diligence that might not be apparent. Buildings included in the sale could require substantial repairs that the buyers had not originally budgeted for or factored into their offer.

Such issues would have been identified had due diligence on buildings and land been carried out by the buyer prior to the transaction and could have had a major bearing on the decision to buy and the price. 

Conversely, pre-sale due diligence can identify issues and give the seller the opportunity to rectify them before putting the company on the block or answers to questions raised by the buyer that could be a stumbling block to a successful sale. Pre-sale due diligence might identify that part of the site has a higher value alternative use and should be kept out of the sale, to be sold separately.”

We have many case studies where we have saved acquisitive clients from making costly mistakes and also enabled sellers to take actions that enhanced a sale.  This advice applies not only to M&A deals but also to property transactions.

If you are in the process of disposing of or acquiring a company, part of a company or a property, ensure that you or your advisors carry out the property and environmental due diligence; it could save you from wrong decisions and costly errors in the future.

Alps Group have recently become Associates to the CPA and would be happy to speak to you to give further advice if this has thrown up any queries.

Tel: 01332 346424