At SEO, in our experience, the most valuable work in a major transaction often happens before the transaction properly begins.

That may sound slightly at odds with the mood that usually surrounds these moments. Once a business starts considering a sale, divestment, merger or strategic investment, there is a natural pull towards pace. Advisers want momentum. Boards want clarity. Management teams want to move from possibility to process. But transactions have a habit of exposing what a business hoped was true, rather than what is. Once the process starts, weak assumptions become expensive. Sometimes that cost appears in valuation. Sometimes in credibility. Sometimes in the unseen erosion of leverage when issues surface under somebody else’s scrutiny rather than your own.

That’s why we believe in taking a wee step back first.

A pre transaction audit is not there to flatter management, nor to slow things down for the sake of it. It’s there to test whether the business is genuinely ready, whether the leadership team is clear about what it wants, and whether the story being prepared for the market is grounded in present reality rather than old belief. The discipline is not in designing the test. It’s in applying it without cognitive bias, without attachment to entrenched views, and without giving undue weight to assumptions that may once have been valid but may no longer be relevant.

And we should be clear about one thing. This is not a 'smartest people in the room' exercise. In our opinion, that idea is complete nonsense. Transactions are not improved by ego, by hindsight dressed up as wisdom, or by advisers keen to sound impressive after the fact. They are improved by experienced people with real sector knowledge, no vested interest, and the judgement to review a business on the basis of evidence rather than noise. The task is not to offer loose opinions or colourful Monday morning football manager anecdotes. It is to carry out a constructive review, present findings clearly, and identify practical opportunities for improvement where they exist. That is the distinction that is important. The value lies not in sounding clever, but in being relevant, independent and useful at the point when it can still make a difference.

That’s the purpose of this piece.

Before We Begin

When a business begins to consider a sale, divestment, merger or strategic investment, the first instinct is usually to call the investment bankers.

That instinct is understandable. They know the market. They understand buyer appetite. They know how to run a process and build competitive tension. They are often essential to a successful outcome.

But they should not always be the first call.

Before the materials are drafted, before the valuation discussion begins, and before a timetable starts to take on a life of its own, there is a more basic question that deserves attention. What exactly are we bringing to market, and why now?

That question sounds simple. In practice, it rarely is.

In our experience, leadership teams often approach a transaction with several objectives sitting side by side. They want value, of course. But they may also want certainty, timing, legacy, continuity for staff, protection for customers, and some degree of control over what happens next. All of those aims are understandable. The difficulty is that they do not always point in the same direction. If the central objective is not made explicit, the process can become crowded with competing preferences. It feels active, but it isn’t always clear.

That lack of clarity matters because markets are pretty unforgiving. They can tolerate complexity. They can tolerate imperfection. What they struggle with is ambiguity that comes from the seller not having decided what it really wants.

A proper pre transaction audit deals with that early.

It begins with motive. What outcome is genuinely being sought? Maximum value. Speed and certainty. A partner with strategic reach. A clean exit before market conditions shift. A carve out that sharpens the remaining business. These are not cosmetic differences. They shape the process, the likely counterparties, the structure and, ultimately, the result.

It then turns to reality.

That means not just the numbers, but the operating truth underneath them. How resilient are earnings? How concentrated are customers? How repeatable is performance? How dependent is delivery on a handful of people? How transferable are client relationships? How robust is the supply chain? How credible is the energy transition proposition? How much of the story is capability, and how much is aspiration?

These are not awkward questions because they are negative. They are awkward because they are useful.

In our experience, many businesses carry forward beliefs that were earned in an earlier chapter and never fully revisited. A market position that was once distinctive may now be less differentiated. A growth narrative that was once plausible may now rely on conditions that have changed. A capability that management regards as strategic may be seen by the market as standard. None of this means the business lacks value. It simply means the business has to be seen as it is now, not as it used to be, or as those closest to it still kinda prefer to describe it.

That is where cognitive bias becomes a real commercial issue.

Familiarity can make old assumptions feel true. Repetition can make internal language sound like evidence. Success in one cycle can lead sensible people to overestimate the durability of a position in the next. A pre transaction audit is valuable precisely because it challenges that tendency. It asks whether the beliefs guiding the transaction are current, transferable and defensible under scrutiny.

That challenge is best made by people who are free to say something difficult.

Not yet. Not like this. Not with this story. Not until these issues are understood properly.

That independence matters. Advice is most useful when it is not being pulled, even subtly, by a financial interest in momentum for its own sake. There is nothing wrong with advisers being paid to execute a transaction. That is their role. But the work that comes before it should be capable of leading to an answer that management may not especially enjoy hearing.

Sometimes the most commercially valuable conclusion is that the business should pause, improve a few material points, and come back stronger. Sometimes it is that the story is good, but the structure is wrong. Sometimes it is that the market timing is less favourable than the internal mood suggests. And sometimes it confirms that the business is ready, the rationale is sound, and the process should proceed with confidence.

All three outcomes have value.

What matters is not whether the audit tells management what it hoped to hear. What matters is whether it leaves leadership better informed, less exposed to surprise, and more able to make deliberate choices rather than reactive ones.

That’s why we see the pre transaction audit as a critical step, not a cautious indulgence.

It creates clarity before choreography. It puts evidence ahead of assertion. It forces the leadership team to distinguish between what it knows, what it assumes, and what it merely hopes. And in transactions, that distinction can make a very material difference.

The Ten Tests of a Pre Transaction Audit

A good pre transaction audit is not a box ticking exercise in our opinion. It is a disciplined attempt to separate what is true from what is familiar, and what is commercially relevant from what is merely comforting. In our experience, the real value of these tests lies not in whether they sound sensible in a boardroom, but in whether they still hold when looked at without sentiment, habit or institutional loyalty.

1. Motive. Every transaction begins with a stated rationale. The better question, we think, is whether that rationale is the real one. Businesses often say they are pursuing value, but value is usually only one part of the picture. Sometimes the real motive is timing. Sometimes it is fatigue. Sometimes it is risk reduction dressed up as ambition. Sometimes it is the quiet recognition that the next phase of growth requires a different type of owner. None of that is improper. But until the true motive is identified, the process can become confused by competing aims. What looks like strategy can turn out to be a collection of preferences that have never been forced to rank themselves.

2. Readiness. There is a difference between wanting to transact and being ready to transact. Readiness is not confidence. It is not a decent recent trading period. And it is not management’s ability to tell a good story under pressure. It is the extent to which the business can withstand serious scrutiny without becoming defensive, contradictory or reliant on explanation after explanation. A business may be operationally strong and still not be ready. Equally, a business with imperfections may be very ready if it understands those imperfections clearly and can speak about them with calm precision.

3. Quality of earnings. Headline performance can be persuasive, but markets usually look beyond persuasion fairly quickly. The central question is not just what the business has earned, but how it earned it, how durable those earnings are, and how much of them would survive transfer to new ownership. A business with modest but reliable earnings is often in a stronger position than one with impressive numbers resting on a narrow customer base, unusually favourable timing or a handful of exceptional contracts. The point is not to be cynical about good performance. It is to understand whether it is structural or temporary.

4. Operational truth. Every business develops an internal view of itself. Over time that view can become polished, repeated and rarely challenged. The pre transaction audit should ask a simple question. Does the reality of delivery match the confidence of the narrative? In offshore energy, that may mean asking whether utilisation is as robust as it appears, whether backlog quality matches volume, whether technical capability is genuinely differentiated, and whether day to day execution depends more on informal workarounds than formal strength. Buyers can accept weakness. What unsettles them is discovering that confidence was standing in for evidence.

5. Market relevance. A company’s idea of its market position is not always the same as the market’s view of it. That gap can stay hidden for years inside a well functioning business because long standing relationships and historical success provide a kind of insulation. A transaction removes that insulation. It asks, in effect, what is this business worth to somebody who does not already know it, like it or feel loyalty towards it? That is why market relevance matters. Are we still differentiated in ways the market values now? Are we leaning on language that once carried weight but now sounds generic? Are we speaking about ourselves in terms of yesterday’s hierarchy or today’s reality?

6. Risk transfer. Every transaction carries risk. The more useful question is which risks transfer with the business and which do not. Some liabilities are obvious. Others are embedded in contracts, concentration, people, systems or culture. A business may look strong in aggregate while carrying specific exposures that would matter a great deal to a new owner. Customer dependency, deferred investment, succession gaps, supply chain fragility and margin quality all sit in this category. A pre transaction audit should not treat these as awkward footnotes. They are part of the commercial substance of the deal.

7. Separation and integration logic. This test is often underestimated because it sounds procedural. It is not. In divestments, carve outs and mergers, one of the most persistent sources of disappointment is the assumption that businesses are cleanly separable or more easily combinable than they really are. Shared systems, shared people, shared reputation and shared overhead have a habit of looking simple in principle and messy in practice. So the question is not whether a structure can be drawn. It is whether it can work. What stands alone in reality? What only stands alone on paper? And where are we mistaking managerial familiarity for operational independence?

8. Management depth. A transaction is partly an assessment of assets, contracts and market position. It is also an assessment of whether the business can continue to perform through change. That brings leadership into view. Not just charisma or credibility, but depth, resilience and transferability. How much of the business sits in a few individuals? How much confidence is institutional and how much is personal? Whether the team beneath the visible leadership can carry weight when ownership, governance or expectations shift. This is not a question of personalities. It is a question of continuity under altered conditions.

9. Adviser fit. In our experience, businesses too often choose advisers by reputation alone. Reputation matters, but fit matters more. The right adviser is not simply the most prominent. It is the one whose sector understanding, transaction experience, buyer access and judgement match the actual circumstances of the business. A mismatch here can distort the entire process. The business gets framed in the wrong language, introduced to the wrong audience, or pushed towards a structure that suits the adviser’s muscle memory better than the company’s reality. The cost of that is not always visible immediately, but it is usually paid somewhere.

10. Independence of judgement. This is the test that gives the others their integrity. Can these questions be asked without cognitive bias, without inherited assumptions being protected, and without anybody in the room benefiting from a conclusion that simply keeps the process moving? That is harder than it sounds. Most organisations accumulate beliefs that once made sense and are therefore granted a kind of continuing authority long after their usefulness has weakened. The pre transaction audit should not be there to honour those beliefs. It should be there to test them. Not aggressively. Not theatrically. Just honestly. Because in transactions, as in markets generally, reality tends to collect its due in the end. Better, in our view, to meet it early and on your own terms.

Used properly, these Ten Tests do not make a leadership team more cautious. They make it more deliberate. They do not slow a good transaction down. They improve the odds that it begins for the right reasons, in the right shape, and with fewer illusions carried quietly into the room.

Call to action

If you’re considering a sale, divestment, merger or strategic investment, the question is not whether a process can be launched. It usually can. The better question is whether it should be launched in its current form, on its current assumptions, and on its current timetable.

That is the work worth doing first.

At Sheret Energy Offshore, we help leadership teams take that critical step back. We challenge the story before the market does, test the assumptions that may have hardened into habit, and assess whether the business is truly ready for the scrutiny and consequences of a major transaction.

If that’s a conversation worth having, get in touch. A clear eyed review before momentum takes over can protect value, sharpen judgement and materially improve the quality of the decisions that follow. david@sheret.net

David Sheret, Chief Executive Officer, Sheret Energy Offshore - david@sheret.net

David Sheret is an internationally experienced offshore energy executive and strategic adviser with more than 20 years of experience across global markets. He has held senior commercial and board level roles as both an executive and trusted adviser to SMEs and private equity backed businesses. He served on the board of Subsea UK, now the Global Underwater Hub, from 2015 to 2019, operating in both executive and non executive roles during a significant period in the sector’s development. He later co founded two advisory firms, one of which he exited successfully in 2024.

David has advised multi billion and million dollar enterprises and high growth mid market companies on buy side and sell side transactions, debt raises and strategic growth initiatives across a wide range of offshore and subsea markets. His experience includes ROV, fluid engineering, saturation diving, power management systems and drone inspection, reflecting a rare combination of commercial depth and sector breadth. He holds a BA in Law and Management from RGU and is now preparing for his third equity raise process, having successfully completed two previous processes in 2019 and 2022.

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