One man’s trash is another man’s treasure. An interesting business valuation.
In my experience with sufficient investigations: ‘The truth will always come out.’
When you’ve been an accountant for as long as I, you get a remarkable ability to sense when financial information is being suppressed.
Two parties were in the midst of divorce, and I was engaged to resolve their disagreement regarding the value of the husband’s business: a warehouse that housed spare parts for discontinued aircraft.
These parts were purchased for next to nothing. While the husband understood their potential resale value, when presenting his financial data for the business valuation, the financial records were showing that his business was barely profitable and at risk of insolvency.
Something seemed off
I knew that for the right buyer, these parts would be considered extremely valuable, so my concern was that the financial picture was being depressed, and then once the divorce was settled, these seemingly worthless parts would be sold off for a significant profit, offering additional liquidity for the husband.Read more
So, my advice to the wife was simple: wait.
After several years, the husband was not able to hide the fact that the business was indeed profitable, and that the warehouse assets were, in fact, valuable.
Once this true financial picture was established, the parties were able to reach a settlement through negotiations, without the case progressing to court. The truth indeed did come out.
This tactic is not something we often employ, but in the right situation it can completely change the outcome of the settlement negotiations.
That’s why it’s important to engage expert forensic accountants, such as Vero Consulting, with years of experience across various industries and countries, who can identify these types of cases and allow you to employ the best approach for a successful outcome.
To find out more about the forensic accounting services we offer, please click here and I’d be happy to have a ‘commitment free’ discussion about your issue.