What does it mean now the business has private equity backing? | Insights

You have been through the excitement and hard work of obtaining PE backing for the business. The work does not stop there as now the business needs to deliver on the plan.

A business backed by PE will often find there is a need to enhance the finance function in house, as well as ensuring the right advice is taken on accounting and tax matters.

With the need to provide regular updates to the PE house, and an observer on the Board, timely and accurate production of management information becomes more important.

Cashflow forecasts need to reflect the expected performance of the business, and the future tax landscape – which may not be as expected.

Keeping management engaged and onside to deliver on the plan is critical, and typically there will be a management incentive arrangement to introduce so that key individuals have equity in the business.

All of this adds complexity, and we can help with explaining and advising on the issues which will be relevant.

We can help you make the most out of your financial system to obtain the information you need, and / or get involved in the preparation and presentation of MI packs.

We have teams that are experts in using many different accounting packages, as well as being able to advise on reporting add-ons, helping you to automate your reporting process, meaning investors receive timely, accurate and concise information that matters to them.

We have a large corporate audit team and provide services to many PE-backed businesses within our audit portfolio.

We use the latest audit tools, including data analytics, to provide real insight and value to the audit process.

Our team are experienced at engaging with investors throughout the audit process to ensure that the areas of most interest are tested and reported on.

We know from our experience that governance around internal controls and climate-related issues are key, and we will report on these as part of our audit.

Where you are having an audit for the first time, our team have the experience to guide your management team through their first audit and can efficiently manage that transition process with minimal disruption to your business.

New investment can often mean new reporting requirements. You may need to consider group restructure accounting, preparing consolidated financial statements, or a change of reporting standards, for example from UK GAAP to IFRS. Our team has significant experience in these areas and can advise you.

PE funding can be complex, and our team will work with you in advance of the year end to ensure that any implications for your financial statements are considered.

Accounting for transactions involving matters such as convertible loans or share options may require external valuation support to comply with accounting standards. We have experience of these matters in our client base, and our team can support management in advising what may be required.

There are many tax issues which affect a PE backed business, which often are not fully understood before the deal completes. These include:

Are the deal costs deductible for corporation tax?
Are the finance costs deductible for corporation tax? There are several provisions within the UK tax code which can operate to deny a deduction for finance costs, and which may be relevant where PE funding is concerned.
If share based payments need to be accounted for, how are those dealt with for corporation tax?
Management incentivisation using shares may need to be reported to HMRC, and income tax and national insurance payments may be due.

We have experience supporting and advising businesses as they navigate through these issues.

The tax characteristics of any proposed management share incentive arrangement need to be properly understood before it is implemented. Our team can help with explaining the tax implications, setting out options for the design of the scheme, and advising on and assisting with the ongoing reporting and payment obligations.