The importance of commercial property due diligence in mergers and acquisitions involving North-east companies will be put in sharp focus in the months ahead, according to specialists at Knight Frank.
The changing business landscape in the region has created an increase in business sales and corporate refinancing, with deals underpinned by property valuations.
Doug Garden, a partner in the Aberdeen office of Knight Frank, said: “The most valuable asset for most businesses is its people. Next on that list is generally the property from which the business operates.
“Where businesses are sold as a going concern, are inviting venture capital or are the subject of a strategic corporate acquisition they require to report their assets to enable investors to make a valued judgement on the future. The property asset, or liability, could play a major part in the investment return if left unchecked.”
Property due diligence aims to establish on a case by case basis what the true picture really is in relation to commercial premises and it is an area in which Knight Frank expects demand to continue growing throughout 2016.
The Knight Frank partner added: “A company may be reporting that they operate from an office or warehouse facility which is worth £2million. It may be that due to market conditions, location and type of the facility that it is now only worth £1.5m, and indeed requires £250,000 worth of maintenance work to return it to a good condition. This illustrates why property due diligence is so important in any deal.”
In difficult trading conditions throughout the North-east, due diligence is being embraced as part of wider business planning.
Doug Garden said: “From a different angle, property due diligence can also highlight opportunities for the would-be investor by adopting a strategic view on the particular transaction and offering advice on the effectiveness of the way in which the property and land in question is being utilised. For example, under-utilised sites or accommodation can be sold to generate capital receipts.
“Property due diligence is not something which just adds cost to a transaction - it is a service that can truly add value to key business decisions, as well as providing peace of mind.”