Sorgem Evaluation acted as a financial advisor for a european drinks distributor, in order to estimate the appropriate royalty rates…
Actions are defined as deceitful if the discovery of the omitted information leads to the suspension of the agreement between both contracting parties because of the deceit/deliberate misrepresentation.
Deceit/deliberate misrepresentation during an acquisition include:
- Misleading target company financial forecasts
- Omission of key events that will affect these forecasts
- Analysis of a target company’s historical financial performance
- Past agreements between the target company and/or the seller
The analysis of a deceit/deliberate misrepresentation closely combines legal and economic/financial considerations, such as:
- Assess the quality of the due diligence performed, as expected from a professional, in obtaining the information required to reach an agreement
- Analyze the omitted information and its importance relative to the agreement reached
- Assess the nature of the exchanges held between both contracting parties
- Assess the methodology used in reaching a sales price
- Judge whether the information transmitted is misleading or not
If the consequence of a deceit/deliberate misrepresentation is the annulment of an agreement, it may not always be possible in practice (for example, the target company merged with the acquiror, etc.).
Our intervention consists in providing an expert opinion on the existence of such a deceit/deliberate misrepresentation, and provide the client with an estimated quantifiable damage resulting from an opportunity cost for the buyer from being able to negotiate a better acquisition price had the information been complete.