Jim Kondonis is the CFO of Lowes Manhattan. Read Jim’s answer to the question, Tell me about a time when you received terrible service from an accounting firm.
How did it make you feel? What could they have done differently?
I won’t call it a terrible service; I’d rather call this a service that didn’t add value. It was
in a past life of mine. I was working with a Big Four accounting firm and we were using
them as an adviser on a particular acquisition we were working on.
The company that I was involved with was looking at a major acquisition. We decided we’d outsource the due diligence process and obviously involve our accounting partner in the deal. To cut a long story short, it cost us a lot of money for very little value. What happened was that the deal fell over at the 11th hour and we had a big bill to pay.
In fact, the owner of the business I was working with had to negotiate the big bill down to $300,000. At the end of the day, the due diligence process failed because certain parts of the sales contract were not relayed back to the business owner. If they were communicated early on in the piece, we probably would have saved a lot of money, since the deal would have not proceeded, very early in the due diligence process. It came down to the fact that the accounting firm didn’t really understand the operations of the business that they were involved with and didn’t understand the needs of our business. If they understood the needs, then looking at the sale contract, they would have picked up this anomaly in the contract and known for sure that it just wouldn’t have worked for the business.
They didn’t pick up this contract anomaly? It wasn’t discussed at all?
No, until right at the 11th hour when they said, ”Oh, and by the way, in the contract,
there’s this and this, and you can’t use the brand without the permission of the current
owners”. If they really understood how a retail operation worked, then they would
have known that this condition just couldn’t fl y. The whole deal would have been
sidelined in the first couple of weeks. We would have saved a huge amount of time,
effort and expense.
What could they (i.e. the accounting firm) have done differently?
They should have read the sales contract thoroughly. If they didn’t have the skills to
review the contract then they should have said something or recommended another
adviser to us. Their due diligence seemed to focus only on the numbers side and didn’t
take into account the commercial implications of the contract.