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Diagnostic Business Review

When a company experiences liquidity problems, it is likely to be at significant risk of the breach of its lending covenants, or a breach may have already occurred. A Diagnostic Business Review may be commissioned by stakeholders to establish the company’s current financial and operational position and obtain recommendations and advice for the optimal solutions.

Also known as an Independent Business Review, or IBR, it is commonly used by banks, equity investors or alternative lenders, and is undertaken by an independent third party who provides recommendations based on their findings.

What areas are covered by a Diagnostic Business Review?

A thorough analysis of the following aspects of business is undertaken:

  • Capabilities of the management team
  • Cash flow, profit and revenue forecasts
  • Assets and liabilities
  • Historic financials and performance
  • Debt servicing
  • Working capital requirements

The review team will also examine critical issues affecting the company, including:

  • Long-term viability
  • Competition
  • Market dynamics
  • Creditor and stakeholder expectations and objectives
  • Legislation affecting the business and industry in general
  • Lender considerations

Other aspects of a review

  •  In-house financial systems, controls and information security
    The financial systems used by the business fall under the parameters of a Diagnostic Business Review. The systems are scrutinised to ensure the necessary controls and procedures are in place and that data integrity is a priority issue and is maintained at all times.
  • Assessment of the borrower’s business plan and deliverability
    A full critical assessment of the business plan and its’ viability is undertaken. Stress testing the plan against actual commercial and operational challenges and evaluating elements of risk provides reliable information on which the stakeholder can base their next move.
  • Review of the group structure (if applicable)
    Group structure will be assessed for its complexity and effectiveness, and whether it is a viable proposition in its current form. Corporate simplification opportunities are identified and can be the catalyst for improved financial performance.
  • Analysis of security cover and potential risks
    Levels of lender security will be analysed to determine whether sufficient cover is in place, and what form this cover takes. Any risks to the lender and the security held by them will be identified in the report.

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Contact one of our BTG Advisory specialists to discuss our services in further detail

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