Global professional services firm Unido Digital has launched a physical asset due diligence, compliance and verification practice to service the investment community, including investment banks, private equity firms, law firms, corporate investors, and high-net-worth individuals. The offering is designed so that buyers, debt or equity investors can quickly obtain an on-site physical review and inspection of any potential investment, almost anywhere in the world.
As more companies and investors pursue opportunities in emerging markets, or even remote locations of mature developed economies, it becomes increasingly important to go beyond the typical audits and financial reviews of financial due diligence, and actually inspect the underlying tangible assets of any acquisition, merger, or financing. In addition to conducting on-location physical due diligence of potential investments or relocation, the service is important for ongoing compliance and verification, says CEO Loren Moss. “More and more, institutional investors are finding opportunities in emerging markets such as Latin America, The Caribbean, Asia, Africa, Eastern Europe. A deal can look good on paper, but an independent party should actually show up and make sure that the asset is what the documentation says it is,” says Moss. “We also see cases where a potential investor wants confidentiality or to avoid publicity. Knowing that a big investor is interested in an asset can distort the price.”
But when investing in, purchasing or funding any significant asset, be it a business, building, agricultural property, mine, power plant, nonprofit initiative, or any other valuable undertaking, there is no substitute for eyes and ears on the ground to verify what the documents state.
The service is directed towards corporate clients & private equity, but is priced to make sense for high-net-worth individual investors and family offices. Generally an investment bank or corporate law firm would engage with Unido Digital to work in a collaborative fashion with auditors and accountants conducting financial due diligence on a transaction. In addition to transactions, ongoing compliance and verification, such as for supply-chain, labor conditions, or quality are important.
“Let’s suppose you are investing in a shopping center in The Caribbean
. Have you actually verified that the real foot or vehicle traffic is what they claim it is? Look at the case of Miniscribe. Investors thought they had a warehouse full of hard disks that they were selling to buyers like IBM. But if you went to their warehouses in Malaysia, the packages were literally filled with bricks!” Moss insists that an inspection would have protected investors against the multi million dollar fraud that came to light. “Insurers have underwriters. Real estate investors have property inspectors. Now acquirers and investors have a similar service.”
“Look at Theranos. They defrauded investors out of hundreds of millions of dollars over a magic box that nobody bothered to look inside of,” said Moss. “There were investors who looked closely and decided not to invest. The ones that just relied on paperwork and hype lost out.” According to Moss, if anyone either hired an independent third party to verify the claims or simply insisted on verifying them physically, they wouldn’t fall for similar deceptions. Moss recounted the case of a commodities trader who purchased a ship load of coffee from Africa, after conducting several similar transactions; only in the final instance, he was sold a “bill of goods” and was defrauded when there was no actual ship, and no actual coffee. Physical due diligence is designed to deter this.
Interested investors can learn more here.
Unido Digital shares common ownership with Finance TnT