Common Risks Often Missed During Due Diligence - QuickReadBuzzQuickReadBuzz

The impact on shareholder value

Knowing the value of a business and delivering real value to a client company entails far more than using EBITDA multiples or going along with a rule of thumb to keep the peace. As professionals, valuators must be far more rigorous in their engagements, and focus on delivering value. The obligation to identify, measure, manage, and mitigate the risks are their responsibility. In this candid analysis, Dr. Carl Sheeler shares some insights, based on his 1,000+ engagements, where he has found problems that led to disputes, misalignment of expectations, and company-specific risks that impair value and value creation.

In addition to contributing to family and equity holder acrimony, the list below contains representative items that lead to disputes and shareholder value impairment, as well as client and advisor expectation misalignment.

Most items are not found on financial statements because a company is dynamic, and these do not lend themselves to quantification. These issues of operations and strategy require more than ad hoc knowledge of accounting and finance.

Both enterprise and equity level values must consider company-specific risks (listed below) in order to arrive at a reasonable investment rate of return! This requires intellectual rigor. It’s also expensive, but the costs are outweighed by the value to the entrepreneur.

The percentages shown on each line below reflect the approximate frequency of occurrence of each risk, as I experienced them during the 1,000+ engagements I have conducted during the past 20+ years. The opportunity to identify, measure, manage, and mitigate these risks are yours; you can add value for a company if you recognize these risks.

Read more at:
Common Risks Often Missed During Due Diligence - QuickReadBuzzQuickReadBuzz:

For additional information regarding Florida business sales, acquisitions and valuations, please contact Eric J. Gall at info@buysellflbiz.com or 239.738.6227. Also, visit our Florida Business Exchange website at www.fbxbrokers.com and my personal website at www.buysellflbiz.com.