Viability Assessments are typically commissioned by investors who are concerned about the performance of an existing venture. VA’s usually need to answer 2 questions:
Is the investment safe?
If not, what intervention is required?
We’re accustomed to conducting VA’s in political, complex environments. Our experience across industries and geographies gives us cultural sensitivity and the ability to create a safe environment for staff to confide in us. We respect (and will not break) that trust but it often enables us to gain insights that would not normally be possible.
VA’s usually happen when the funded company appears to be headed towards insolvency – the easy answer is often to simply shut the business down. However, we prefer to try and find ways to protect the investment and, where possible, preserve jobs.
We genuinely want to find solutions to companies’ problems and that is usually obvious to the subject firms and our clients, the investors.
Our cross-industry / cross-geography / turnaround expertise, and our ability to use learnings from previous engagements to spot opportunities for improvement now, means that we are frequently able to propose ways to make the investment work, even when the initial outlook appears otherwise.
We extracted information from a resistant management team, thus enabling the client to make a decision about a major investment.
Client: Public investment fund
Industry: Heavy industry
The Subject company was failing to service their debt to the Client and was also not providing the contractually required Financial updates. The project had to answer the following questions:
(1) Was the debt safe?
(2) If not, what needed to be done to ensure that it would be?
The Client was a public entity, investing taxpayers’ money, so it was especially important that there was transparency in its ventures. The Subject company had a clear ability to win government and military work but had few private sector jobs. In South Africa pre-2018, that in itself was a red flag.
A Viability Assessment of the business and its environment, supplemented by a financial audit carried out by a specialist team.
As was to be expected, the management team was uncooperative about supplying key information. We allowed them to take their time and also emphasized that being unable to provide the required information was an answer in itself.
Our patience, the series of interviews, site visits and assessment of Financials and other company records gave the management team an adequate opportunity to present their case. That meant that they were not able to argue with our conclusions.
The company fulfilled the conditions for being insolvent. We also uncovered substantial mismanagement which was reported to the Client to take further action.