Major UK ROSCO Vendor Side Technical Due Diligence
The overview
IPEX was retained as vendor Technical Advisor in relation to the potential sale of a stake in a major UK rolling stock leasing company (ROSCO), involving a wide range of rolling stock passenger and freight assets. IPEX performed technical due diligence (TDD), which was summarised in a TDD report provided as part of the vendor pack, as well as providing technical and commercial input into financial model assumptions. IPEX also facilitated Q&A sessions with bidders, which addressed key questions on the ROSCO’s arrangements for fleet operation, maintenance, safety, fulfilment of lessee obligations, and utility of the assets.
Our client's challenge
The client sought to divest its stake in a major UK ROSCO through an open market process, for which it was necessary to procure transaction advisory services. It required the development of a vendor’s technical due diligence pack, technical challenge and verification of its financial model, and support during the Q&A process with prospective purchasers.
- Review of financial model inputs
- Review of company's engineering organisation
- Review of full rolling stock portfolio, and fleet specific risks and issues
- Review of generic UK issues affecting all rolling stock fleets, such as mandatory modifications or changes to UK rail legislation
The response
IPEX acted as Technical Advisor to a financier seeking to divest its stake in a major UK ROSCO, working alongside the vendor’s financial and commercial advisors. IPEX’s team of expert consultants produced a detailed vendor technical due diligence report analysing the risks and opportunities of the portfolio. The report gave detail on areas including an asset review, operational costs and performance, maintenance arrangements and risk allocation, outstanding fleet delivery issues, defects and decarbonisation opportunities.
IPEX approached the analysis, using a proven methodology, on a fleet by fleet basis with a succession of four key questions:
1) Business demand – beyond the current lease term will the requirement for this fleet remain?
2) Asset stickiness – if yes to 1; then at the end of the current lease will this fleet be the preferred option?
3) Asset versatility – if no to 1, but also as a contingency; then at the end of the current lease will a need for this fleet exist elsewhere?
4) Asset performance – will the asset assumptions be achieved, what is the total cost of operation and how do they compare to potential competitor fleets?
The value to the client
IPEX’s role as Technical Advisor supported the client in progressing and marketing its stake in a smooth and efficient process. The development of vendor due diligence material and provision of support during the Q&A process provided insight and assurance to prospective purchases during the marketing process.
