Ken Howard
Share this content

Unreasonable bank manager

Unreasonable bank manager

Just doubting myself and could do with knowing what other practitioners would do..

Situation is that I have a client selling their business.  I prepared "selling accounts" i.e. an adjusted profit & loss account with depreciation, interest and directors remuneration removed which I understand is the protocol in these instances and have never had a problem in the past doing likewise for many clients.

This time, however, the buyer's bank manager is being a pain in the posterior and is wanting far more information, i.e. balance sheet, depreciation, details of the business debts, how it's financed etc.  Obviously I can tell the client to send the full company accounts which would show all this, but should he do so?  My feeling is that the bank manager is taking the mickey and asking for completely irrelevant information.  I feel that providing this level of detail may jeopardise my client's position as it would show how much the business was bought for intitially, how much debt the company has, etc., thus giving far too detailed a picture of how much profit they may make on the sale and how desperate they may be to sell.  My view is that if you were selling a house, you wouldn't tell the buyer how much you paid for it and how much your mortgage was would you?

I have a sinking feeling that the bank manager simply doesn't know his stuff.  Or possibly worse, that he doesn't understand that the buyer is buying the goodwill, equipment etc from my client company, and NOT buying the shares from the existing shareholders.  In this latter case, I can of course see that the bank manager would need to know all about the company, but even then, surely he'd want proper due diligence and not just a look at the full accounts?  And anyway, why is the bank manager worrying about balance sheet items - surely he should be asking the buyer to prepare a business plan to support his borrowing applications which the buyer's accountant would prepare? 

My instinct is that the bank manager is an idiot and that the client should resist sending such detailed information.  To my mind, the adjusted profit & loss account, supported by perhaps copies of recent VAT returns, details of stocks and debtor payment patterns would be more than enough for the buyer/buyer's accountant to put together a business plan to support borrowings.  Or perhaps it's me being a fool?  Anyone?


Please login or register to join the discussion.

By Anonymous
30th Oct 2009 11:37

I don't think either you

or the bank manager is being a fool, Ken.   I think both your positions are totally rational and defensible.  And at the end of the day, one side or the other will need give way.

On the facts given, I think the buyer may be a fool.  Perhaps the bank manager knows his client !!  Or perhaps he simply is doing this for his own loandue diligence.  I wholly agree that obtaining the "old" company accounts is not sufficient due diligence of course, but I would regard it as an essential step I would take every time.  And be more concerned the more the seller insisted they were irrelevant because I was not buying the company.  But again, that's down to who wants it more. 

Sounds as if you may have more chance trying to strong-arm the buyer to talk round his bank manager than trying to strong-arm the bank manager direct?  But if I were advising the buyer or I were his bank manager, I wouldn't budge, I'm afraid.  So it would mean the buyer would have to over-ride the advice and take the plunge.  Could happen.

Thanks (0)
By Anonymous
30th Oct 2009 11:41

Sounds like due diligence?
I'm no expert in buying and selling but I can't see why I wouldn't be within my rights to see a set of full accounts/ask probing questions before buying a business/lending money to some buying a business?

I'm sure I don't need to explain why banks are going to greater lengths before lending?!

I don't think its fair to say he's an idiot if he's committing substantial bank funds, surely he has a right to dig around!

By the way, it's very easy to find out how much someone paid for a house!

Thanks (0)
31st Oct 2009 12:12

dont supply

i think you have already done exactly what is required of you.  you haveprepared abridged accounts that remove any overheads specific to your clients operation of the business.

the balance sheet may reveal liabilities that are nobody else's concern other than your clients and i think the bank manager is oput of order in reuesting it.


he's probably just trying to cover his back but it needs pointing out to him that the info is irrelevant.



Thanks (0)
By Anonymous
31st Oct 2009 19:01

??out of order??

Good grief, there is some strange stuff about here. 

It is up to the buyer and his advisers / backers what they ask for, and it is up to the seller and advisers / backers what they hand over. 

Can we drop this twaddle about "idiots" and "out of order" and "they have no right to know".  It is entirely up to the buyers team what they want to know and ask for.  It is entirely up to the sellers team what they want to give and provide.

It's a perfectly sensible request in my view and, like a previous poster, I would have doubts about proceeding without it.  But obviously, as always, the facts and circumstances of each case are individual, as will be the positions of the buyer and seller and their teams.

I'm sorry, but I cannot believe that Ned or the OP have much experience in buying and selling businesses, the way they are talking.  Or else they have always had duffers on the opposite side of the table !!

(p.s.  please note, this does NOT mean I am advocating that Ken "hand over whatever is asked for", or even hand over the company accounts at this stage.  Far from it.  But can we get away from this idea that the request is "idiotic" or "out of order"

Thanks (0)
Share this content