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Improving a Client’s Investment Analysis Through Cash Flow Forecasting
|Industries||Oil & Gas|
|Services||M&A and Due Diligence Consulting|
An international private equity company was planning to acquire oil and gas production facilities in several countries, carrying environmental investment requirements and other liabilities totaling some 150 million euros.
The purchaser's needs went beyond the usual limitations of an Environmental Due Diligence assignment. The client needed to understand how the investment requirements would affect the target company's cash flows in the short, medium and long term. In the end, revised cash flow projections substantially strengthened this client's business case.
Working closely with the client's deal team and the target company's management team, Golder determined:
- Which investments needed to be made immediately
- Which could be postponed for several years and still meet regulatory requirements
- Which could be scheduled even further out in the future.
Golder then estimated investment cash flows based on likely regulatory deadlines, project implementation periods and available technical resources. Annual cash flows were estimated for each of the first five years of ownership, with subsequent estimates for the periods five to 10 years and greater than 10 years.