What is it?
We work with organisations to develop bespoke models according to their needs. Our modelling approach is to gain a full understanding of the pivotal issues for our client and to focus our work around these issues.
What we do
A well written robust business model is an incredibly powerful tool for financing assessment, operational planning for staff and other key resources as well as being a persuasive communication tool with other stakeholders.
Based on our experience, a typical model build will cover one of these areas:
Bid Support
Bid support models usually focus on detailed modelling of the operations and financing supporting a bid with scenarios to help understand (and price) the risk and returns. The key outputs of these models can include drawdown and repayment schedules, project charge (i.e. the unitary charge in a PFI deal) and investor returns.
Operational
For projects entering the operational stage, the focus is on the ability to assess performance against a given benchmark (usually the model used at financial close). Project finance is unusual in that one considers a very long timescale (often 25-30 years), and a loss in one period may be anticipated – the important thing is performance against the benchmark. A good model will aid this comparison and reforecast over the life of the project to help the historical performance be understood within the context of the full project.
Secondary market and other transaction support
Corporate finance events such as equity investment/purchase and complex debt transactions usually require different models from project finance. The operations of the company are usually the focus and are likely to be complex and risky. There may be a major change in operations (indeed, this is often the raison d’être for the transaction), which will necessitate detailed modelling of initiatives and scenarios, and working capital is often a major factor. The shorter timescale of these models (often 3-5 years) reflects the usual investment cycle of the capital providers. The key outputs are usually geared to the investment, affordability and returns.
Other evaluation models
Organisations go through internal change whether a major asset purchase, restructuring, relocation or a cultural / management change. Models tend to be risk-focused and will tend to address what can go wrong, what the financial impact will be, and how likely it is to happen. Matters such as working capital, financing and returns may be less important, even though the ultimate output could be affordability. In some cases, these models do not consider the financial implications at all. Organisations that are resource-constrained rather than limited by funds may be more interested in whether their employees have the time to complete the process than how much it will cost.
The benefits to you
Our modelling team has the capability to produce complex and robust models on a timely basis. We develop models in accordance with best practice, understanding the key stages of the development process and having systems in place to minimise the risk of error.
We work closely with the relevant parties such as sponsors, funders, management boards and audit committees to identify the needs of each of the potential users of the model and to ensure the model focuses on the critical issues.
An expert team of PKF consultants will:
- Develop your model in accordance with best practice, incorporating internal quality control and testing procedures. These processes may involve internal logic checks, peer review, manager review, analytical review and code review as appropriate and based on the assessed risk
- Incorporate flexibility into the model for running sensitivities, “what-if?” scenarios and to cope with the changing demands of the underlying business
- Create models that are transparent. This promotes correctness, ease of audit and better acceptance by funders who can be confident that the model addresses their needs
- Produce documentation according to the requirements of the assignment in order to promote understanding, correctness and auditability
- Ensure any tax and accounting issues are appropriately reflected within the model.
Why PKF?
PKF is one of the market-leading organisations in financial modelling. We have a long history in the industry and consider our model development approach to be highly advanced. Modelling assignments are led by senior consultants with several years of modelling experience. Each member of the team is highly trained, most being chartered accountants and tax specialists as well as expert modellers.
Within our practice we liaise with business and change consultants, audit, tax and corporate finance experts as well as our international network for expertise on foreign accounting and tax implications. Recent build assignments include:
- VT Plc – Bid support for a waste PFI project
- Hilton Group – Worldwide group income planning
- Home Office IND – Operational modelling
- Defence Science and Technology Laboratory - Developing a cost and risk forecast model
- Donarbon – Bid support for a waste PFI project.
For further information about any of the services offered please contact either Brian Tash or Kirit Mistry.
|