At a time when corporate governance is at the top of everybody's agenda and with accounting practices being under especial scrutiny, Kwik-Fit, the UK car repair chain bought by Ford in 1999 for £1bn, is reported to be at the centre of a £3.4m accounting discrepancy. This is likely to both delay and reduce the price of the firm’s proposed sale. Several UK private equity firms have expressed interest in the business.
The Financial Times reports that Ford’s auditors, PWC, have found that liabilities had been understated in Kwik-Fit's accounts by £3.4m. It appears that Kwik-Fit had been receiving goods from suppliers but was failing to account for their cost with the resultant effect of increasing reported profits.
News of the discrepancy is likely to raise alarm amongst prospective bidders as well as the broader market as speculation continues that there are going to be more mis-statements of company figures coming to light in the wake of the Enron and Worldcom debacles.
Ford was looking to receive at least £800m for Kwik-Fit but potential buyers including UK private equity groups CVC, Apax, and Permira, plus French private equity house Paribas Affaires Industrielles are reported to be proposing a price considerably below this figure at around £300m.
Kwik-Fit, set up by entrepreneur Sir Tom Farmer who sold the business to Ford, operates from headquarters in Edinburgh and employs 11,500 across its 2,400 service centres.