Vendor due diligence valuation | IBV™

Bring together statutory accounts, management reporting, revenue detail and supporting evidence for adjustments. Reconcile differences between reporting periods and explain changes in accounting presentation. Buyers are likely to question claims that cannot be traced to records, particularly where the proposed value relies on unusual add-backs, recent growth or margins not yet reflected across a complete trading cycle.

The proposed output can explain maintainable earnings, valuation drivers and information gaps within the agreed scope. Supporting schedules should make adjustments understandable to the owner and advisers. Where external sharing is contemplated, agree reliance and permitted use before circulation; a report prepared for the seller is not automatically a report on which every prospective buyer may rely.

Valuation-related due diligence is not an audit, a complete verification of the business or a guarantee of sale proceeds. Buyers may reach different conclusions or request their own investigations. For a narrower price-reference instruction, consider selling-a-business valuation; transaction documentation and disclosure obligations should remain with the owner’s appropriately qualified legal and accounting advisers.

Vendor preparation becomes useful when another adviser can follow a claim from the sale narrative to the underlying record. Create an evidence index organised around material valuation inputs, not simply folders labelled accounts and contracts. For each input, identify the document, reporting period, responsible person and any reconciliation needed. The index should show where evidence is absent as clearly as where it is available.

Government valuation guidance identifies financial, legal and operational records as relevant inputs. 1 Turn that broad collection into a practical chain: reported revenue to management ledger, ledger to sales analysis, and explanations for differences. Retain the original extracts when preparing presentation schedules. A clean spreadsheet is helpful, but it should not become the only surviving record of how an adjustment was constructed.

Give every proposed earnings adjustment its own entry. Record the amount, accounting location, commercial reason, supporting documents and expected treatment under new ownership. Separate an expense that genuinely will not recur from an expense that is unusual but necessary. A major repair may happen irregularly while still representing a recurring economic cost of maintaining productive equipment.

Use a status field such as supported, partly supported or unresolved. Do not remove a difficult item merely because it weakens the preferred earnings figure. If management disagrees with an adviser's treatment, retain the alternative views and their consequences. A buyer can then understand the sensitivity without discovering an unexplained revision halfway through negotiations. The register also prevents different versions of an information memorandum from quietly using different adjusted profit figures.

Create a single issues log for matters that could change valuation inputs. Each entry should describe the issue, documents needed, responsible adviser and interim assumption. Keep factual corrections separate from proposed commercial solutions. An expiring customer agreement is a fact; obtaining a new contract is an action whose outcome should not be presumed.

Business Queensland's due diligence guidance describes investigation of contracts, financial records, expenses and operations. 2 Use those purchaser concerns to anticipate evidence requests, not to claim that vendor preparation has completed a buyer's investigation. An issue remains open until the relevant evidence or specialist conclusion is available. Record unresolved exposure honestly, even where no reliable numerical adjustment can yet be made.

Before releasing material, agree a controlled process for questions and updates. Maintain a dated answer log so the owner, accountant and transaction advisers do not give incompatible explanations to different parties. When a source schedule changes, identify the affected conclusions and preserve the previous version. These controls support a consistent evidence package; they do not convert management records into audited information or guarantee that a purchaser will accept the seller's preferred treatment. A clear exception trail is often more useful than an apparently flawless presentation that cannot withstand detailed questioning.

See our fixed-fee valuation packages and confirm the scope and fee before commissioning work. Confirm the purpose, intended users, information requirements and inclusions in a written engagement before work begins. Calculated Value and Limited Scope delivery is 5–7 business days from complete financial information and a signed engagement. Full Conclusion timing is confirmed individually in the engagement letter. Specialist requirements or changes to the instruction may affect suitability and timing; confirm these before relying on an external deadline.