Case Study – Russian Federation
An international property fund was looking to acquire a company that was developing retail properties near Moscow. The fund instructed Billiter to initially undertake basic due diligence on the Russian company in order to determine the background of the managers and the other business interests of the parties involved.
Billiter’s searches quickly found that the company’s management had recently established a similarly named company. This second company had not been offered for sale to the fund and further investigation confirmed that this company controlled the supply of utilities to the site. While local litigation searches did not show that the company or its principals had been involved in litigation, local sources enquires revealed that the firm’s owners had been previously involved in a lease dispute with a European retailer. While this had been settled before reaching court, it had involved the supply of utilities to the retailer at heavily inflated prices.
As a result of our findings, the fund decided to restructure the deal. Our graduated approach allowed the client to gather information on the management and the companies involved as the deal progressed. This avoided unnecessary upfront due diligence fees in the event that the deal did not proceed. It also ensured that the client was ultimately in possession of information critical to the deal’s success and avoided exposing the fund to significant commercial and reputational risk.