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Due diligence on BHS ‘extensive’ GT partner tells MPs

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MARK BYERS, Grant Thornton’s global head of restructuring, has given evidence to MPs sitting on the joint Business Innovation and Skills (BIS) and Department of Work and Pensions (DWP) select committee hearing into the collapse of BHS.

GT was engaged by Retail Acquisitions Ltd (RAL) to conduct due diligence on BHS before its owner Dominic Chapell formally committed to secure the retail chain for £1.

The probe sought to unearth more detail about the BHS acquisition and its pension scheme, now saddled with a £571m deficit.

Byers was joined by Andrew Frangos, chief executive of Cornhill Capital and Olswang partner, Stephen Hermer, who were questioned about the degree of checks and balances conducted to see if  RAL had sufficiently considered the interests of those in the pension scheme members and whether its plans for BHS were ‘credible’.

Byers told the committee: “Our interaction with RAL would have been relatively limited because of the role that we were performing, which was to undertake financial due diligence on BHS and then provide a report that would identify the key risks and issues that RAL would need to consider before they actually acquired BHS. So we were not involved in recommending that they buy BHS, nor were we involved directly in the negotiations.”

Byers explained that after the acquisition, GT also advised management on ways to tackle some of the issues identified in its due diligence work.

The GT partner said he “thought there were some constraints in relation to the diligence, in terms of the availability of information in certain respects, but in general terms it was a fairly extensive piece of diligence”.

In terms of tarnsforming the struggling retailer, Byers said he believed a turnaround was possible if BHS was free from parent group, Arcadia, especially when it came to the renegotiation of leases.

He confessed that there had been issues in obtaining all the information about BHS for due diligence purposes.

“Clearly a major challenge was the status of the pension scheme. The information provided on where that had got to was relatively limited, and we did not have access to speak to the trustees.

‘Generally the level of information from Arcadia was very responsive but we would have expected more on the pension side,’ Byers said.

The select committee heard that GT had not met up with the BHS pension scheme advisers or trustees, but had with Deloitte, Arcadia’s pension advisers.

Byers said “there was a gap in our understanding” regarding the pension scheme “and that was reflected in our diligence report”.

MPs will hear from Sir Phillip Green and Dominic Chappell next month.

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