Case Study: Purchaser discovers competitor’s accounts receivables may be overstated – litigation is avoided through analysis of accounts and negotiation
A professional services company purchased a competitor to expand its customer base and acquire intellectual capital. Shortly after the closing, the purchaser’s accounting team discovered that the competitor’s accounts receivable balance may have been overstated. Counsel contacted DGC after receiving a recommendation from the purchaser’s investment banker.
DGC reviewed the terms and conditions of the purchase agreement. A target level of accounts receivable was expressly stated in the deal. DGC data mined the accounts receivable balances by customer, date and dollar amount. Analysis of accounts and verification of balances were performed to determine which accounts, if any, were overstated.
DGC quantified the potential overstatement of specific accounts receivable balances. DGC assisted the parties in negotiations to resolve any disputed and overstated amounts. Ultimately, the parties settled upon a final purchase price without subjecting themselves to litigation.
For additional information about this or any related topics, contact Kimberley A. Train, CPA/ABV at 781-937-5112 or firstname.lastname@example.org. Kimberley is a Partner and leads the Forensic Accounting practice.