As the need for detailed due diligence grows after a slew of corporate governance issues, Kroll and BMR Advisors have formed a strategic alliance to offer investigative and due diligence services together.
Corporate investigations player Kroll and BMR Advisors, which offers tax advisory and financial due diligence services, said the alliance will combine the former’s ability to gather primary source information from internal and external sources with the latter’s experience in analysing internal financial records.
Kroll India’s country head Reshmi Khurana and Sanjay Mehta, head of risk advisory practice at BMR, said that there is a gap among the service providers in the Indian market and together the firms can offer 'no-compromise due diligence.'
"Sometimes different pieces of due diligence give different or conflicting conclusions, which a deal manager cannot immediately reconcile and loses time resolving it," said Khurana. She said Kroll-BMR will instead provide a more holistic view, rather than conflicting results coming from financial due diligence and investigative due diligence processes.
Mehta said with this service, BMR and Kroll teams will work together and share information continuously which is not typically the case.
There have been a number of corporate governance cases recently which have led to private equity-promoter conflicts.
Kroll said there has been a 50 per cent increase between 2012 and 2013 in fraud-related investigations of portfolio companies of private equity firms. In all the cases, the investors held minority positions in the companies and did not have access to quality information.
Kroll and BMR said they see the biggest increase in fraud related investigations in the portfolio companies in: (1) export oriented industries where the customers of the portfolio companies are based
abroad and it is difficult for PE funds to identify conflicts of interest; (2) businesses that are not generating sufficient cash despite growing top- and bottom-lines; (3) businesses that rely on government approvals and are dependent on cash transactions such as real estate and infrastructure.
(Edited by Joby Puthuparampil Johnson)