Scottish Ministers make up to £32m available for 'due diligence' on failing companies

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Up to £32m has been set aside by ministers to hire top-level consultants to undertake due diligence of floundering businesses in a first for the Scottish Government.

The new framework will give ministers the ability to quickly hire giant consultancy firms to help provide information on companies around which the government may be considering an intervention.

Previous examples of such intervention would include the embattled Ferguson Marine, which was nationalised in 2019, and the deals at the Lochaber smelter and Dalzell steelworks which saw GFG Alliance, led by Sanjeev Gupta, take over after government intervention.

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The government has in the past had to rely on ad-hoc contracts with consultancy firms when seeking advice and due diligence around these deals.

Six firms, including two members of the ‘Big Four’ accountancy firms, EY and PricewaterhouseCoopers, American consultancy giant McKinsey and Company, Interpath Advisory (previously KPMG’s restructuring practice), Teneo Restructuring Limited and FRP Advisory, have been appointed to the framework.

However Deloitte, which has undertaken extensive consultancy work on the GFG Alliance deals after EY were sacked shortly after the deal at Lochaber was completed, is not included in the framework agreement.

More than £800,000 was spent by ministers on the Deloitte/GFG Alliance contract in the last financial year alone.

The £32m contract, which represents a cap rather than the total amount of spend, will run for three years with the option of an extra year.

GFG Alliance, owned by Sanjeev Gupta, is the sort of company which may be subject to this contract in future.GFG Alliance, owned by Sanjeev Gupta, is the sort of company which may be subject to this contract in future.
GFG Alliance, owned by Sanjeev Gupta, is the sort of company which may be subject to this contract in future.

A Scottish Government spokesperson said: “Due diligence assessments take place ahead of Scottish Government interventions to support companies at risk.

“The aim of this new framework is establish a single route through which those assessments can be commissioned, the first time the Scottish Government has taken such an approach.

“Under the framework, suppliers will be appointed to undertake the due diligence exercises in a timely way and may include specialists in accountancy, tax advice, technical expertise in economic or market analysis and other areas.

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“Each investment decision is different and will have its own unique characteristics. It is therefore critical that appropriate advice is taken both from expert staff within the Scottish Government as well as external financial, commercial and legal advisers that might be necessary.”

The Scottish Government refused to name companies it had already intervened in and where due diligence is ongoing on the grounds of commercial sensitivity.

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