All too often after an acquisition, an acquirer’s management team is surprised by the difference between its pro forma balance sheet projections and the final independent, third-party valuations. These unexpected changes in valuation could have a significant impact on the acquiring institution’s regulatory capital requirements and future earnings potential.
To avoid such last-minute surprises, more institutions are involving their third-party valuation teams earlier in the process—during the due diligence phase—in order to provide preliminary valuations. Involving valuation teams earlier in the process has grown more popular as the pace of Federal Deposit Insurance Corporation-assisted acquisitions has slowed and as banks accelerate the pace of open-bank transactions, which allow more time for planning and due diligence.
An acquiring bank’s management team needs a clear understanding of the valuation issues that are likely to arise during the due diligence process. Read more from Dan McConaughy and Chad Kellar from Crowe Horwath LLP on the benefits of making valuation an early part of the due diligence process.