Smooth Sailing: How to Make Sure Your Valuation Engagement Runs Smoothly
By Sean Saari, CPA, ABV, CVA, MBA, Partner, Advisory Services
We have all had to tackle tasks that just seem to grind and clunk along without much direction or urgency, which can be frustrating for all of the parties involved. The same can be true for business valuations – some engagements may stretch on for extended periods of time for various reasons. In order to avoid these headaches (and the potentially increased fees as a result of the valuation expert having to pick up and put down the project multiple times), the party engaging the valuation expert and those involved with the valuation process at the company should keep in mind the following points:
Gather all requested documents
Valuation experts often request a substantial amount of documentation at the outset of an engagement, which may be supplemented by additional requests during the engagement. Experienced experts will typically only request items that they believe are necessary to render an opinion of value. In most cases, failing to fulfill a request without an explanation will only result in the valuation expert requesting the document again. To make the valuation process as efficient as possible, gather all of the items requested by the expert the first time they are requested and let the expert know which items may not be available/applicable.
Provide requested documents timely
Engagements may sometimes drag on when documents are not provided to the valuation expert in a timely manner. The more quickly that documents can be provided to the expert, the sooner that he or she can complete the engagement.
Be responsive to follow up requests and inquiries
In most valuation engagements, a management interview is necessary. In such an interview, the valuation expert asks questions of management based on his or her initial analysis of the subject company. It is not uncommon for additional research and document gathering to be required of management after such a meeting. The sooner that responses are provided to open items from the management interview, the more quickly the engagement can move ahead.
Share information with the expert up front, not at the end of an engagement
Failing to discuss a key piece of information with an expert until the end of an engagement, or when a draft report has already been prepared, can throw a wrench in the progress of a valuation engagement. It is important for management to be proactive and address items that they believe may be significant to the valuation up-front. Saving the discussion of such items until the users of the report realize that they were not specifically addressed in the concluded value can result in additional work for all of the parties involved and possibly change the concluded value.
Be prepared to be involved
Although a company’s management may not be involved with the actual valuation computations for the subject company, a valuation engagement is not a “hands off” process for management. Rather, active participation by management in the valuation process by being responsive to requests and inquiries, as well as by proactively sharing information that may be relevant to the valuation, will help the engagement run smoothly and efficiently.