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Governance And Best Practice In Asset Transfers: The Due Diligence Imperative

20 May

Introduction:

Capital-intensive industries and critical infrastructure inherently involve large investments, technological challenges, and commercial and political complexity, exposing stakeholders to financial, environmental, safety and legal risks.

Asset mergers and divestment is a common process in high-hazard industries and can happen at any phase in an asset’s lifecycle. When assets change hands, there are risks that buyers and sellers are exposed to, and Technical Due Diligence (TDD) is required to understand and quantify the risks involved. Technical and Environmental Due Diligence concerns within a greenfield construction project would differ greatly from a late-life asset and would have to be tailored relative to where the asset is in its lifecycle.

What is Due Diligence?

Due diligence is the process of thoroughly and comprehensively examining asset information to determine its value, risks and potential liabilities. In doing so, buyers will examine the legal, financial and compliance as aspects of an asset to identify any potential issues that could affect the transfer’s value or legality. This process, if executed thoroughly, will safeguard against unforeseen liabilities and empower investors to make informed decisions.

While this process is not new for commercial transactions, we believe it is typically biased towards the legal and financial liabilities the vendor could be facing. In high-hazard industries such as mining, energy and utilities, it is equally important to demonstrate the performance, reliability and integrity of the physical assets.

Our Data Driven Approach to Due Diligence

AIE’s approach to Due Diligence ensures that the buyer is satisfied with the condition of the tangible assets, providing them with the confidence that the capital investment items are in a satisfactory condition and have an adequate and quantified remaining life. The service also sets the benchmark for asset performance and identifies a range of optimisation opportunities.

Our services pertaining to Due Diligence and Asset Transfer Advisory are performed using our Veracity software allowing standardised and efficient barrier assessment methodologies to be employed and findings to be baselined and analysed against the entire Veracity database.   Our approach includes:

  1. Data Science: Our Data science team engage AI through our veracity Lab to benchmark asset condition and read unstructured data sets to provide insights into asset condition and risk.

  2. Monitoring Asset Condition: We have extensive practical experience in designing, operating, maintaining, and inspecting high-risk, capital-intensive assets. Site-based inspections and engineering reviews are conducted by our skilled discipline engineers using the Veracity app, providing competent assessments of asset condition and remaining life.

  3. Evaluating Commercial Risk: There are significant financial risks involved in asset transfer, and AIE can help quantify this risk by providing projections for CAPEX and OPEX spend based on current and predicted asset conditions. Our commercial experts also provide estimations of reinstatement and insurance costs, along with quantified decommissioning liabilities.

  4. Integration and Operational Excellence: Our discipline specialists ensure operational excellence by integrating the operations management of the buyer and seller into one Operational Management System (OMS) framework. By supporting the integration of business processes, removing duplication and differences in governance structures, we are adept in advising on organisational design and identifying critical positions.

  5. Ongoing Performance Monitoring: Post -transfer, AIE is experienced in monitoring the performance of the transferred assets, helping identify areas for improvement, and implementing any necessary changes to ensure optimal performance and increased equipment uptime.

To learn more about our Due Diligence and Asset Transfer Advisory services, contact our specialists today.

 

 



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