Background on due diligence
Historically, the only advisory firms involved in the sale and purchase of assets were Accountants, Solicitors and valuers. The accountants checked the businesses financially, the solicitors reviewed the company's documentation and formed contracts of sale and where necessary valuers appraised property owned.
Often the buyers would already be transacting in a similar business and therefore would undertake a review of the proposed transaction based on how they work. However, this would not consider the whole of market and parties, not in a similar business, would be at a significant disadvantage.
There was an opportunity to offer the expertise to undertake an independent review of the transaction, including detailed file level reviews which provided information and data to assist in the assessment of the risks involved and ultimately the value of the transaction. However, there was a gap in respect of expertise available to undertake an independent review. In the 1990s banks in the UK started to consider the sale of pools of loans. This was the norm in the USA and some of the early buyers were in fact US banks. Tim Keast carried out the first due diligence review in 1995 and later formed Euro Risk Management in 1997, made up of a small team of bankers who had access to a pool of knowledgeable lending and loan servicing staff. In 2005 the largest player in the US, Clayton, sought to enter Europe and by this time Euro Risk Management were completing reviews regularly outside of the UK in Italy, Holland, Sweden, Germany, Spain and Portugal. Clayton acquired Euro Risk Management and became Clayton Euro Risk (CER) in early 2007.
Over the coming years the team were very influential in the development of the provision of due diligence on whole loan sales. In particular, Michael Chadwick established the process and quickly gained market acceptance for the provision of vendor due diligence with ultimate reliance on the services being transferred to a successful purchaser.
In 2014 Tim Keast, President and CEO of Clayton Euro Risk left and joined forces again with the former US CEO of Clayton, at Situs where Loan Risk Advisory was created. Over the next 3 years a strong and very experienced team moved across from Clayton Euro Risk and quickly established itself as a significant provider of due diligence services. In the due diligence sector, which covers New Mortgage Originations (Flow Underwriting), the Loan Risk Advisory team carried out more reviews in this period than the rest of the market combined.
Following the merger of Hatfield Phillips International (HPI) and Situs Asset Management (Situs), Situs took the strategic decision to focus on their core commercial real estate loan servicing and advisory services. Tim Keast assisted the management team to take this opportunity to create a fully independent service provider comprising the former members of Situs’s Loan Risk Advisory team, and Risk Advisory Europe was created.
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