INTOSAI Working Group on the Audit of Privatisation,
Economic Regulation and Public Private Partnerships

Guide to Privatisation

Generic Auditing Frameworks

• Generic Privatisation (Trade Sale) Issue Analysis
• Initial Public Offering Issue Analysis

---

Generic Privatisation (Trade Sale) Issue Analysis

Main Idea	Level 2	Level 3	Level 4
Was the privatisation a good deal (i.e. Value For Money)?	1. Was the correct privatisation strategy chosen?	A. Were there clear objectives for privatisation?
		B. Were all possible options identified?
		C. Were the options properly evaluated?
		D. Was there a clear basis for the decision adopted?
	2. Was the privatisation process well managed?	A. Were clear privatisation objectives disseminated?
		B. Were all risks identified and managed?
		C. Was there appropriate expertise and resource available to undertake the sale?	a. Did the vendor have appropriate expertise and resources?
			b. Was there a robust process for appointing the advisors and contractors?
		D. Was there an appropriate valuation exercise?	c. Was the valuation conducted by those with relevant expertise?
			d. Was an adequate valuation method adopted?
			e. Were multiple valuation methods identified for comparative purposes?
			f. Was the valuation conducted at a suitable time/ kept up to date
		E. Was the privatisation marketed effectively?	g. Was adequate preparation undertaken?
			h. Were all potential bidders identified?
			i. Were bidders given adequate time/information?
			j. Was the sale product defined appropriately?
		F. Were the costs of the sale budgeted for and managed effectively?
	3. Was the best price achieved?	(In a trade sale) A. Were there a good range of bids?
		B. Were the bids evaluated using appropriate criteria?
		C. Was there a clear basis for the decision adopted?
		D. Did the vendor get a good price from bidders?
	4. Is the deal likely to meet its objectives?	(Depends on objectives) e.g. A. Will the business have access to funds for investment?
		B. Will the range, quality and flexibility of services continue to be available?
		C. Will the industry in question remain competitive?
		D. Were the staff handled appropriately and was best practice followed?

Initial Public Offering Issue Analysis

Main Idea	Level 2	Level 3	Level 4
Was the Flotation/Public Offering a good deal?	1. Was the Flotation/Public Offering process well managed?	A. Were there clear objectives for the Flotation/Public Offering?
		B. Were all the risks associated with the Flotation/Public Offering identified and managed?	a. Will any Government’s strategic interests be protected post Flotation/Public Offering?
			b. Was the timing of the Flotation/Public Offering appropriate?
			c. Were any additional liabilities retained by the Vendor?
		C. Were there appropriate governance arrangements and adequate expertise and resources available?	d. Were appropriate project management arrangements in place?
			e. Did the Vendor have appropriate expertise and resources to manage the Flotation/Public Offering process?
			f. Were the costs of the sale budgeted for and managed effectively?
			g. Was there a robust and competitive process for appointing advisors and contractors?
			h. Were fees paid to advisors/contractors in line with market practice?
			i. Were lock up arrangements entered into with the Vendor and Investors appropriate?
		D. Was the Flotation/Public Offering marketed effectively?	j. Was adequate preparation undertaken?
			k. Were the underwriting and book building arrangements adequate?
		E. Was the business correctly valued?	l. Were the valuations conducted by those with relevant expertise and adequate methods adopted?
			m. Were the valuations done at the right time and kept up to date?
		F. Were executive, management and staff shareholdings and incentive plans (including lock up arrangements) agreed and valued appropriately?
	2. Was the best price achieved?	(In a Flotation/Public Offering) A. Was the cover ratio reasonable?
		B. Was there a clear basis for the decisions taken?
	3. Is the deal likely to achieve its objectives?	(Depends on objectives) e.g. A. Is the floated business likely to deliver in terms of expected business development?
		B. Will the range, quality and flexibility of services continue to be available?
		C. Will the business remain viable?
		D. Will any residual holding be a benefit to the Vendor?
		E. Were plans for use of the proceeds received by the Vendor sensible?
		F. Will the public offer empower staff and the wider public? (where appropriate in line with privatisation objectives)
		G. Is the deal likely to lead to enhanced long term Socio-Economic and Environmental effects? (where appropriate in line with privatisation objectives)	a. Will the deal improve efficiency, ensure economic stability, promote cost effectiveness and generate economic growth?
			b. Will the deal provide sustainable environmental and poverty reduction opportunities?

Back to top ^^

Back to: Guide to Privatisation index