Case 1: Change of the transaction structure Due Diligence
A diversified IT holding rendering complex services and offering individual solutions for companies from various industries, including banking, TMT (telecommunications, media and technologies) and logistics.
A major developer and integrator of BI systems rendering services to key players of the Russian market.
The client intends to purchase the Object and to restructure the debt.
We have proposed the following scope of works:
- Quality of key assets
- Use of borrowed funds and capital
Using our experience in the TMT sector, we have focused on the following:
- Intangible assets
- Work in process
- Capex vs Opex
- Net debt
- Structure and dynamics of the working capital
- Quality of company’s income
- Reliability of subcontractors
We have performed an in-depth analysis and identified the key risk areas:
- Overstatement of intangible assets
- Overstatement of WIP
- Incorrect capitalization of expenses
- Inability to repay the debt
- Funnelling funds via affiliated subcontractors, tax risk
- Underestimation of expenses
- Misrepresentation of EBIDTA due to transactions with related parties
We have provided our client with information about the actual profitability and assessed the corresponding tax risk.
The structure of the transaction has been changed due to the data obtained during Due Diligence.
The result: +20% to EBITDA
Case 2: Cypriot shareholders and creditors
The company operating in the Russian Federation has Cypriot companies as its shareholders and creditors. It was required to assess tax implications of the structure given the legal requirements regarding controlled foreign companies.
We have developed a plan of creating real presence of Cypriot companies in the incorporation country including, among other things, opening an office, hiring employees, re-allocating powers among the beneficiary and directors of Cypriot companies.
To minimize the risk of recognition of the crediting Cypriot company conduit, we have developed a plan of debt repayment to the creditor from the offshore jurisdiction.