TRANSITIONS & TRANSACTIONS: Due Diligence
Barrington Partners supports the process of transaction evaluation by performing due diligence within the advisory industry on investment advisors, administration firms and software companies. Barrington supports the due diligence process in the following areas.
- Company Valuation: Similar to our fairness opinion work, Barrington tracks valuations and transactions in the following areas:
- Institutional and/or retail investment advisory firms
- Traditional and alternative administration companies
- Software firms that support the advisory or administration side of the industry
- Ownership: diversification of ownership, incentive structure
- Business structure and strategy: hierarchy, strength and seniority of senior management, quality and organization of contracts, product materials
- Investment Products: team seniority, portfolio process and rigor, product positioning, competitor comparisons (15c-1 evaluations), relative performance over time.
- Metrics: product performance, growth of AUM, reinvestment and success of capital investment, profitability.
- Health and culture within business: key individuals (throughout the organization), tenure, moral.
- Operations and technology: strength of individuals and technology in use, proprietary, in-house or outsourced, and software, hardware, data center, back-up, disaster recovery planning, testing.
- Does technology differentiate the firm in anyway?
- Do limitations of platform limit the company in anyway.
- Regulatory and Compliance: CCO, Risk, audits, supervisory history.
Barrington will produce a report that includes both an executive summary and detail from the project. The report will outline the areas reviewed, findings, areas of concern and opportunities for improvement by new ownership.
Private Equity firms generally want the project to be staged to move to greater depth only as the business is found to offer attractive attributes. Private Equity firms will also look for a report that can be distributed to institutional investors that may not be from the industry.
On due diligence projects our focus is first to help our client (the potential buyer) to evaluate the overall health and strength of the firm. The process then focuses on how to improve the company and create greater value and opportunity. Finally, we focus on the determining the right valuation and strategy based on the information that comes from the due diligence process.