Valuation professionals met on July 23 for a seminar to review a case-study exercise at the National Association of Valuation for Malaysia.  The case study was attended by more than 55 professionals: many are seasoned professionals, as well as many are new to the valuation profession.  

In this seminar, Bill Hanlin (IACVS president) went through the process of performing a due-diligence engagement where the buyer of a retail pharmacy required a closer look at the business records.  These records included financial history, future expectations for earnings, working capital needs, contract terms that would impact future rents, employee pay and benefits (union contract), as well as supply contracts and projected cash-flows.

During the seminar attendees discussed various aspects of the actual valuation portion of the engagement, how the engagement was reported to the client, and the discussions that valuation professionals can have with their client and attorney to make this type of engagement the most valuable for all the parties (client-buyer, bank and legal counsel). Attendees reviewed the administration of the engagement, including the terms of fees, reporting and delivery to the client.

The importance of correct future cash flows was stressed as, in the case-study, the buyer was expecting to leverage the purchase (borrow from the bank).  This meant that the buyer needed professional assurance that the purchased business would repay the bank debt and also provide a higher level of compensation to the buyer.