Global risk PowerPoint Presentation Personnel Compliance and Business Valuation

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Personnel Compliance and Business Valuation
Due Diligence during an acquisition
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In the automotive dealership space I have
seen acquisitions turn into legal tribulations
when after a deal is closed personnel
related non-compliance issues pop-up
creating huge, multi-million dollar
headaches literally days after deal close.
What was found was a fundamental
disregard for the human element in the
valuation of a business...what have the
people been up to that reinforces the
business processes that helped make the
business successful as well as what they
have been doing on their own when no one
is looking.
Author : James E. Lawrence

The due diligence process should
disclose and uncover items that
have a material impact on the
valuation of the business. The
experience above suggests that
uncovering personnel related
liabilities should run hand in glove
with the business' valuation
process...But how does an acquiring
company evaluate the causes of
liabilities that can adversely affect
the acquired business? How
indeed…

In the auto dealership
space, traditional due diligence is
about reviewing the
books, assessing the local market
attributes, following IRS Revenue
Ruling 59-60, using the “comps”
in the local market as well as
reviewing the fun and unique
OEM franchise requirements of a
dealership where factory site
control, image compliance or
exclusivity can have material
impacts in property
valuation, financing
flexibility, and exit...

In ADDITION, you are also buying the
processes and people who make up the
culture, good or bad, that helped that
dealership make money over the years. How
do you gauge the type and extent and
importance of internal processes that build
value for the dealership in question?
Comprehensive due diligence is about knowing
the culture you are buying. Is the business a
stickler for compliance details? Are the people
and processes in place designed to protect
your investment from hungry lawyers and
misguided investigators?

If your valuation consultant did the right things and
you find something “not quite right,” it is obvious
the risks are higher than those assessed when you
could smell the new revenue stream based off the
“Rules of Thumb” your consultant relied upon to
get you here.
So visibility into personnel related compliance
issues provides you the opportunity to offer a
lower price that reflects not only the generally
accurate valuation “Rules of Thumb” but also those
personnel based policies and procedures that can
land you in a closed room with lawyers mumbling
secret something’s in their client’s ears.

Ultimately, those personnel-related risks
you uncover will impact not only what is
paid for a business, but how well you can
expect the business to perform after the
acquisition. After all is said and
done, compliance with regulations and
mandates, compliance with strategic
partner’s requirements and compliance
with those proprietary business
processes unique to your organization all
combine to support and expand your
competitive advantage, which is the
harbinger of valuation.

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Global risk PowerPoint Presentation Personnel Compliance and Business Valuation

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