The IBRC Commission has finally completed its draft report into the sale of Siteserv to the tycoon Denis O’Brien, a tome that runs to well over 1,000 pages.

The Commission has, yet again, missed another deadline by circulating it on July 30 when it had previously committed to completing its draft report in mid-June. But at least the end may be in sight.

The dozens of parties caught up in the Commission have eight weeks to submit their responses to this draft report. The Commission will then have to read and consider whether any of these responses are worthy of incorporation in its final report.

This would make it appear unlikely that the IBRC Commission will publish its final report into the Siteserv transaction on October 31, after it received yet another extension from the Department of the Taoiseach earlier this year to complete its work.

The IBRC draft Siteserv module report is long, complex and being circulated at the start of the August holiday period. Responses to its findings are likely to also be long and complex making it likely the IBRC Commission will require another extension.

At this stage, it will be doing well to publish its completed report by the end of this year.

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So what does the draft report say? We can’t tell you but based on publicly available information it is not hard to draw some likely conclusions. But before we get to that, the Commission has carried out its work unimpeded over the last six years, and lessons must surely be learned from this.

By not being subject to scrutiny by the public, the IBRC Commission has been allowed to go on and on behind closed doors, at huge cost to the taxpayer. This cost is likely to come in at an up to ten times multiple of any potential loss that might have occurred for the taxpayer in relation to the Siteserv deal.

On December 2, 2017, the IBRC Commission went to the High Court, advised by Paul Gallagher SC, today the attorney general, to ensure its work continued in secret by taking proceedings against my former employer The Sunday Business Post.

When the IBRC Commission finally publishes its final report, someone must be called to account to explain the bill incurred and the repeated delays that led to it continuing for six years.

While we can’t tell you the draft findings of the IBRC Commission, we do know a lot about the deal already based on various media reports on the sale of Siteserv to the tycoon Denis O’Brien over the years.

To start with we know the Commission has been tasked with finding out if the taxpayer lost out at all in the deal, and if it was completed to the highest commercial standards.

The Commission is expected to put an estimated number – in the millions of euro – on what it believes the state might have missed out on. The Currency has previously estimated this number is about €5 million, but it could be higher, say €8 million, depending on what assumptions are used to try and calculate it.

By their nature assumptions can be challenged, and it will be hard to definitely argue that a much better deal could have been done. What number the IBRC Commission will land on, in the end, is unknown.

Whatever the number the IBRC Commission eventually arrives at, having considered all responses to its draft report, it has cost a ginormous sum to find this out. The bill for the IBRC Commission is estimated to hit €80 million when all the third-party legal bills come in, which will take time.

So where might the state have missed out on money, if the commission finds that it did? We know that shareholders in Siteserv were paid €5 million by the company in order to vote for the sale to O’Brien.

The rights and wrongs of this have been written about many times over the years and discussed extensively in the Dail.

At this stage, the general view in the media is that Siteserv could have paid shareholders a few million less as the business was a busted flush from their perspective – but that’s only the opinion of journalists.

The risk, as explained at the time by Siteserv management, was that a shareholder might have sued Siteserv to try and stall the deal and squeeze the company for more money. Their fear was that a court action might cause the sale to collapse, so they went with the highest number recommended to pay out to shareholders. The fact that some of the Siteserv team were shareholders in the company – and therefore beneficiaries of some of the €5 million – needs to be considered. But as some of Siteserv’s team had borrowed from IBRC to build up their shareholdings, a good chunk of the €5 million went back to the bank. This reduces the net impact.

But let’s say on balance – with the wisdom of hindsight – Siteserv could have paid its shareholders less, in that scenario may be the taxpayer missed out on a couple of million.

But it would be hard to conclude this definitively. 

What was left on the table?

Another issue to be considered in judging whether any corporate finance deal is a good one was if there was anything left on the table. Siteserv, as we know from its publicly available annual reports presented to the stock market, was a large business with many different subsidiaries doing everything from providing fencing to events to installing television boxes in Ireland and Britain.

An idea most corporate financiers consider when reviewing any deal is how much working capital should be left in a business and whether this could have been safely clawed back. Companies need working capital to get by day-to-day so draining any business of all cash would be dangerous, but could more money have been gotten out by the bank before the sale closed?

This was a judgement call to be made by IBRC bankers dealing directly with the sale, and one that was unlikely to get as high as the boardroom table of a bank. The scale of Siteserv and the number of subsidiaries it had, meant there were millions in working capital still within the business when it was sold. But remember Siteserv wasn’t in receivership, making it very hard, if not illegal, for IBRC to carry out a cash-sweep of the business in what was a consensual sale between the bank and the company. It was reliant too on the information available to it.

Other things to look at might be if there were retention bonuses paid to key staff for staying with the business such as are common in the sale of many companies, and if all of the bonus earners deserved as much as they got. 

Given Siteserv’s perilous financial position this is certainly an issue any review of the transaction might be expected to consider seriously, and one that the company should probably have told the bank about. But again, Siteserv was not in receivership, so it is hard to say whether it was obliged to tell the bank this. Possibly it wasn’t.

After that, the other obvious issue – that has been reported on many times – is whether or not O’Brien was the highest bidder. As has been well documented, a trade player and others complained afterwards, that they weren’t invited into the process. They said they might have paid more, but who can say for sure.

Also, an underbidder in the process said it might have paid more for the company if the bidding process had continued longer. Equally, it might have chipped it.

It would be a tough judgement for even the most experienced corporate financier to decide, in retrospect years later, if the mix of bidders invited to consider buying the business broad enough, or whether the bank would have made more money prolonging the process into another round. Siteserv has argued previously that bringing in trade bidders would have damaged the business as it tried to win new contracts, thereby devaluing it, and it has claimed that it was under extreme pressure to complete a sale as the market was losing confidence in it.

What was the right or wrong thing to do is the sort of thing a non-M&A expert who wasn’t doing deals in Ireland – or even England or the United States – in the years post the crash might find it hard to get a grasp of. There is a world of difference between doing deals in a small open euro-denominated economy that has been bailed out and everything is for sale in the wake of huge depression, and say doing deals in normal times, or in far-flung places thousands of miles away that never experienced the same pain.

We will just have to wait and see where the Commission comes down in relation to who was the best person to buy Siteserv.

The role of the board

The next thing that the IBRC Commission is expected to look at is did the board chaired by the former Minister for Finance Alan Dukes and the bank led by chief executive Mike Aynsley get something wrong deliberately?

The answer to this, as the former Minister of Finance Michael Noonan, acknowledged when he set up the Commission years ago, is that there is no evidence of any wrongdoing by the bank.

This is different to saying that maybe more questions might have been asked of Siteserv as the deal went along – or that the bank should have been told certain things but wasn’t, or that one decision might have turned out better than the other. But to be clear, to this day there is no evidence of any deliberate wrongdoing by the bank.

When making its conclusions, if mistakes were made, the Commission will have to consider a number of factors. For example, is it fair to expect the senior leadership of the bank, and its board, to micro-manage a small deal like Siteserv?

The Commission will have to take into account that it has had the advantage of six years of thinking about Siteserv. It has had access to information from all sides that were not available to IBRC at the time.

It has also had an unlimited budget from the taxpayer – to mull over what might or might not have been, and go down every alley it came across over the years.

The IBRC executive and board was under fierce pressure from Ireland and Europe to do deals quickly and efficiently.

Around the time of the Siteserv deal, it had just sold off a multibillion loan book in the United States and was flat out dealing with multiple crises that were far more complicated and riskier.

The IBRC team had received death threats after it moved against certain borrowers, and it was merging with the basket case-building society Irish Nationwide. There was a lot on.

IBRC was struggling to get the resources required to manage all of the challenges facing it from the state, and unfortunately for all sides, there were rows between it and the Department of Finance over various matters, which were also time-consuming. Like the bank, the Department of Finance was under intense pressure too, and any friction between it and the bank must be viewed in that context.

Presumably, the IBRC Commission will consider what it was like to be on the board or working for IBRC when it reaches its conclusions. Given how the Commission has struggled to get its head around just one small deal, it can surely be expected to consider what it was like to have to deal with everything else facing the bank in real-time.

Any mistakes, if any, that the bank made need to be understood in the context of the extreme pressure the bank – and Ireland – was under at the time, versus the years of economic recovery afterwards when the IBRC Commission was set up. The Commission is producing its report in it a different financial world.

Having considered both the Siteserv deal and its context, the IBRC Commission will have to make a judgement call in relation to the IBRC bankers and its board.

There has been a huge amount posted on social media and alleged in the Dail in relation to former bankers in IBRC. Some of this is true – but a lot of it was entirely untrue, or half-baked.

If the IBRC Commission essentially clears IBRC of any serious infractions, this needs to be made clear in its findings. In justifying all its work, the IBRC Commission must not get lost in 1,000 pages of colourful detail about events and individuals, who were not employed by the state. By all means, let the IBRC Commission come down hard on anybody who deserves it, but for the many who have been unfairly caught up in its investigation for years, it needs to be clear in its conclusions – and restore their reputations.

Information is power

Whenever the final IBRC Commission report is published it will in fairness likely be an interesting read. We know from media reports over the years that it could look at many colourful things from weight-loss holidays to rows between bankers and civil servants, and so on, but whether any of that is relevant to what the Commission has actually been asked to look at remains unknown.

Information when doing deals is power, so who knew what and when, will be a vital part of the Commission’s work. There are millions of documents seen by the IBRC Commission as well as evidence gained from witnesses which has all had to be parsed.

There is no question that the Commission’s team has put a lot of work into its first module.

Set up on July 9 2015, it is now 2,213 days since the entire thing began, and the state has continued to pay for it even during a global pandemic and an ongoing housing crisis when Ireland has had other more pressing needs.

Will it find anything that the state could not have found otherwise for much less money, and in a matter of months versus years by getting independent corporate finance experts and forensic accountants to look at it?

Probably not. The long term lesson from the IBRC Commission maybe, not to take such an unwieldy approach again to investigating controversial complex commercial deals.

A very large huddle of lawyers

The collective term for a group of lawyers is a huddle. The IBRC Commission has certainly been a fantastic employer of lawyers during the six years it has run to date. It is hard to imagine, since the heady days of the tribunals, a place where more have been employed to pore over millions of documents, reams of transcripts, years of cross-examination and so on.

Over the next eight weeks, all of these lawyers will have to review portions of the IBRC Commission’s draft report along with their clients before submitting their responses to it. This will be a monumental task, that includes August, a time when traditionally lawyers holiday. It is worth considering the army of lawyers working at the Commission which kitted out a special room to hold its meetings pre-Covid-19 and also flew in experts from the Far East and travelled at one point to Jerusalem.

The lawyers who are working collectively on the IBRC Commission include some of the brightest and most brilliant legal minds in the country, who will all now turn to the Commission’s draft report over the next eight weeks and beyond that.  The Commission itself has a core team led by two senior counsel – John Hennesy SC and Anthony Aston SC. It then has four barristers – Mairead Coughlan, Brian McCormack, Sarah-Jane Hillery and Kate McCormack as well as solicitor to the Commission Karen Quigley.

Millington – a company owned by Denis O’Brien and Leslie Buckley – which acquired Siteserv, has a legal team that includes Michael Cush SC, and barrister Brian Harmon. Arthur Cox is also acting for O’Brien.

The directors of IBRC are represented by Gerard Duncan SC, Siobhan Phelan SC, and Jack Tchrakian BL. This team is instructed by Eames Solicitors.

Three senior former IRBC executives, Richard Woodhouse, Tom Hunersen and Peter Rossiter, have their own legal team made up of John Rogers SC and Keith Farry BL. Their counsel is again instructed by Eames Solicitors. KPMG, a corporate advisor on the transaction, has appointed Declan McGrath SC and Nessa Cahill SC to act for it, with Eoin Sreenan BL also acting for them. KPMG has asked Dillion Eustace to represent them, as well as relying on its own in-house legal advisor Louise Jennings.

Aidan Eames, the founder of Eames Solicitors was also a director of IBRC, so he has understandably had to appoint his own legal advisors. He has appointed legal executive Manuel Florenda to act for him as well as Groarke & Partners.

Davy Corporate Finance meanwhile has instructed McCann Fitzgerald to act for it, as well as James Doherty SC and Declan Murphy BL.

The co-founder of Siteserv the businessman Niall McFadden has appointed Hugh McDowell BL to act for him, as well as solicitors Fieldfisher. Brian Harvey, the former chief executive of Siteserv, has also appointed Fieldfisher to act for him. Two former Anglo executives Pat Walsh and Karl Cleere meanwhile have Barry Mansfield BL acting for them as well as a team from Denis McSweeney Solicitors. Neil Ryan, a former Department of Finance official who was seconded for a period to IBRC, meanwhile has William Fry acting for him as well as Patrick McCann SC and others.

Red Flag chief executive Karl Brophy, who has an unclear relationship to events, is represented by Eugene F Collins. Michael McDowell SC, John Freeman BL and Rachel Anders BL, are his counsel.

Former IBRC executive Michael O’Sullivan meanwhile has McInnes Dunne Solicitors acting for him. The Department of Finance also has its own legal team. Former Siteserv independent non-executive director Robert Dix has Sean O’Sullivan BL and Robert Dore Solicitors acting for him. Then there is Vladimir Bermant, a former executive with Anchorage, an underbidder for Siteserv, is represented by Maples & Calder, as is Dan O’Connor, a former senior banker who was previously an advisor to Anchorage in Ireland. TJ Malone, a former executive in Siteserv who today is chief executive of National Broadband Ireland, was represented by Ivor Fitzpatrick Solicitors.

And then of course there is the Taoiseach Michael Martin who was cross-examined by the Commission, O’Brien’s legal team and others earlier this year. Martin was represented by Barry O’Donnell SC and Francis Kiernan BL. This is far from an exhaustive list of the lawyers who appeared at the IBRC Commission. There were lots of others who showed up for a few days here or there in bit roles who all had legal representation. Then there were also experts called by the Commission who all too had to be paid. The full list of people is so long, The Currency will not further tire its readers by listing them all.