How a Business Valuation Pro can Help Avoid M&A Pitfalls

Merger and acquisition (M&A) activity increased significantly in the fourth quarter of 2023, signaling a hot M&A market for 2024. But there are some potential pitfalls for unwary buyers and sellers. Here are some common mistakes and how a business valuator can help ensure your deal goes as planned. Reliance on valuation rules-of-thumb Some M&A participants rely on industry “rules of thumb” and gut instinct, especially in mature industries. Although rules of thumb can provide a reasonable basis for initial M&A discussions, they fail to address important valuation considerations, such as nonoperating assets and changes in market conditions. Therefore, they’re rarely sufficient as the sole basis for a deal. Before making a formal offer to merge with or acquire another business, it’s important to obtain a comprehensive valuation...

When a Valuation Professional Finds Fraud

Imagine you’ve got your eye on a business that seems like an attractive investment or acquisition target. It boasts strong earnings, competitive growth estimates and a clean balance sheet. But this business has a secret: fraud. And fraud can dramatically change the prospects — and value — of a company. That’s why, when conducting business appraisals, valuation professionals keep their eyes peeled for signs that fraud is occurring or could easily occur. Gauging fraud risk Business value is a function of risk and return, and one critical risk factor companies face is fraud. So valuators conducting an appraisal might ask management about the company’s internal controls — its policies and procedures to protect assets and ensure reliable financial statements. They may look for particular internal controls that...