Supplier / acquirer due diligence and Blackburn Rovers’ buyer

How much due diligence do you do on your new suppliers?  That obviously depends very heavily on how much you are buying from them and how critical it is to your organisation.  But it has surprised me over the years that such analysis is often very limited or even non-existent, including for potentially 'strategic' suppliers.  A quick D&B report, and then often only the basic version, if you're lucky.

So how much would you do if it was someone actually offering to buy your entire organisation?

That's the issue facing Blackburn Rovers at the moment, and it may have run into trouble as the BBC reports;

"Blackburn Rovers takeover bidder told to cease trading"

Bahrain's trade and industry ministry said it closed the Bahrain-based company that was looking to buy the club after it violated regulations by operating outside its remit.

Now apparently the owner of this firm, Mr Ahsan Ali Syed, has responded by saying there is nothing to worry about, it is a separate firm that will make the purchase and he still has billions available to fund it.

When this first came up a few weeks ago I saw his arrival at Blackburn on the news, in a large fleet of big black cars.  Somehow it reminded me of something - oh yes, Allen Stanford helicoptering into Lords with a large sack of money for his cricket sponsorship, not long before he was charged with fraud. (I don't remember the Glazers or Abramovich making such an obvious show over their acquisitions of Man U or Chelsea; the first you hear of it tends to be when the deal is done).

So I had a look at the accounts for the company that has now been closed down.  I thought about blogging at the time but didn't get round to it - and I'm not an acocuntant after all.  But given the news. I thought it was worth coming back to it.  Now I am not suggesting for a moment that there is anything at all dodgy about this gentleman, but if this had been a potential supplier I would have had a few concerns having spent half an hour flicking through the information provided;

  • A very fancy accounts document, lots of expensive design, photos etc. With my procurement hat on - a waste of  money.
  • But no clear explanation of what the real 'core business' is.  The closest I could get to is that they seem to loan money to people who find it difficult to get finance from elsewhere.  And they also make money from advisory fees.  Right.....
  • In fact, most of their income  and profit (90% + of the $90 million profit) appears to come from 'advisory fees' which are  'related party transactions', and are still outstanding; the related party being Mr Ali Syed himself.
  • So if I understand this correctly, he personally owes the company pretty much the entire declared profit from last year.  And that money is still outstanding, non-interest bearing, has no fixed payment schedule  and is unsecured (according to the accounts).  You would have thought that deserved at least a little explanation in the accounts - any thoughts on that BDO (the auditors)?
  • No detail of the credentials of fellow directors and senior managers. Mr Ali Syed is Chairman and Chief Executive and there is only one other Director; not exactly UK standards of corporate governance.
  • Very rapid apparent growth with again little explanation of how / why.  Growth in assets from $64M to $1.2 Billion assets in a year; but most of this  is 'funds available for use' and its source is a loan from Mr Ali Syed.

I'm not an accountant as I say, and there may be no reason to doubt the takeover if it is coming from another company in the Group.  It may well be that they are sitting on billions; perhaps we'll try and find their accounts to have a look at.  But if I were a Blackburn supporter, I wouldn't put that bid in for Rooney just yet....

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First Voice

  1. Sam:

    I agree, I think the house is about to come tumbling down!

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