BusinessCorporate FinanceMoulton slams buyout due dilligence ‘collapse’

Moulton slams buyout due dilligence 'collapse'

CIMA conference sees private equity chief deliver scathing criticism to accountancy trade as buyout market is reined in due to credit crunch

The head of private equity firm Alchemy has issued a stinging broadside to
the accountancy trade, citing a ‘complete collapse’ in buyout due dilligence at
the height of the private equity boom.

At
CIMA’s
annual conference, The firms MD John Moulton said: ‘We have seen in
the last two-year bubble [of private equity buyouts] a loss of integrity in the
system and we have seen excess. We have seen a complete collapse in due
dilligence. When many of the processes and controls are not there, you have a
high risk of serious errors and a sporting chance of fraud.’

Moulton also warned City bosses that the private equity model is heading for
significantly lower returns because the schemes that banks underwrite when
companies secure debt are in short supply: ‘The money from Collaterised Loan
Obligation vehicles has now dried up – there simply is no money left. Large
buy-outs are therefore un-fundable at present. I predict an era of significantly
lower returns.’

Further reading:

Private
equity reporting load to increase

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