GRENKE AG / Key word(s): Miscellaneous
GRENKE reports on the expert opinion issued by Warth & Klein Grant Thornton and provides an update on the current status of knowledge of GRENKE AG from the special audit by KPMG
Baden-Baden, December 16, 2020: GRENKE AG reports on the expert opinion of the auditing firm Warth & Klein Grant Thornton (WKGT) and takes this opportunity to provide information on its current status of knowledge regarding the special, still ongoing audit by KPMG AG Wirtschaftsprüfungsgesellschaft (KPMG). The subject of the examination by WKGT commissioned by the Supervisory Board of GRENKE AG was the review of the advantageousness and market conformity of the acquisitions of the franchise companies.
Review of the advantageousness of acquisitions of franchise companies
Review of acquisitions in terms of market conformity
According to WKGT's assessment, the valuation methodology for the purchase options agreed has a number of elements that are customary in the market but deviates, in part, particularly from standard M&A practice in the actual implementation of individual transactions. According to WKGT, it is quite common to take into account the special features of young growth companies when determining values and setting purchase prices in the form of growth-related earnings adjustments and multiplier discounts. In the case of several of the takeovers in previous years, the negotiation process, in the view of WKGT, was only comprehensible in light of the specific background of the permanent cooperation with the business partners of the franchise model. In some cases, deviations from the originally agreed general valuation methodology were detected that led to an increase in the purchase price but, according to WKGT, these deviations in relation to the total purchase price were within the usual range when valuing companies in early phases of development. WKGT identified purchase-price-increasing deviations from the originally agreed fundamental measurement methodology in the total amount of EUR 15.1 million (approximately 13% of the purchase prices). Of this amount, EUR 9.2 million alone was related to the transaction in Portugal in 2012. From GRENKE's standpoint, this deviation should be assessed above all based on the strategic considerations at that time, including the intention to expand into Brazil. Other transactions accounted for between EUR 30 thousand and EUR 1.8 million.
Audits of personnel and company law relationships in connection with the ownership structures of the acquired companies
GRENKE provides information about the current state of knowledge of the special audit by KPMG
This is the current status of knowledge of the Board of Directors of the special audit commissioned by the Supervisory Board in connection with the regular audit of the annual financial statements performed by KPMG to update the risk assessment. This status of knowledge does not in any way represent the anticipated result of the audit of the consolidated financial statements and is still subject to further findings obtained until the complete conclusion of the audit.
In addition to obtaining an updated understanding of the Company, the environment and the internal control system, KPMG also carried out functional tests of the internal controls and statement-related audit procedures, including individual case reviews at various points in time. KPMG has already obtained the audit evidence presented below in the context of the risk assessment - subject to the audit conclusion - by the time this report was prepared:
Evidence of the existence of the leases based on confirmation requests, lease payments received, and a review of the supporting documentation
Dependence on resellers
Involvement of resellers in risk management and business relationship with Viewble Media UK
Assessment of the allegation that GRENKE BANK AG provides guarantees to Consolidated Group companies that endanger their existence
Inclusion of franchise companies in the consolidated financial statements; nature and scope of related-party disclosures in the IFRS consolidated financial statements of GRENKE AG
KPMG will report its final results of the audit as of December 31, 2020 in the audit report and the auditor's opinion.
Independent audit procedures by BaFin to continue
Information and Explanation of the Issuer to this News:
16-Dec-2020 CET/CEST The DGAP Distribution Services include Regulatory Announcements, Financial/Corporate News and Press Releases.
Neuer Markt 2
+49 (0)7221 50 07-204
+49 (0)7221 50 07-4218
Regulated Market in Frankfurt (Prime Standard); Regulated Unofficial Market in Berlin, Dusseldorf, Hamburg, Munich, Stuttgart, Tradegate Exchange
EQS News ID:
End of Announcement
DGAP News Service