Unprofessional and lack of knowledge of business valuations

<p>My husband and I were interested in purchasing a business and contacted Aldes. We are both qualified chartered accountants with significant experience in auditing and business valuations.</p> <p> </p> <p>We had our first meeting with the seller which went well. I thereafter wanted to spend a week at the busniess just to see how the business is run. I was advised that this was not a usual request and therefore I had to sign a letter of intent beforehand.</p> <p> </p> <p>Subsequent to our first meeting, the seller had sent me all her financial information, either directly or through broker. Given our professional experience, we performed our own valuations. While I know this is probably discouraged, given our qualifications and experience, its only natural we would do this as we are not only interested in the prior year net profit. Also considering we are buying a business with hardly any assets, we are literally just paying for the goodwill. There were no substantial tangible assets. After using two methods, we came out with a much lower valuation and not theamount that Aldes had advertised. We asked the broker to please share his valuation as we were coming out with much lower valuations and we could not commit to a number without having the full information. Obviously, he first said that the information was confidential to protect the seller. In my experiences however, most people would even get an independent valuation done so I don't see why this should be confidential when you are asking for such a high price. Nevertheless, he sent us a screen shot of 3 methods. We were shocked I must say. Firstly the valuation only took into account one years earnings, then the valuation takes into account potential earnings of R200k higher, which in no ways could be accurate because the business was already operating at its full capacity. Potential earnings would also increase other costs. In the absence of the broker sharing any information, we therefore made an offer which supported our valuation, providing our reasons to Aldes. </p> <p>I also need to add that the letter of intent was very weak. I added my own clauses and sent it back. To which the broker called to say well done, very professionally worded.</p> <p><br />I thereafter received an email where the seller slashed the price by over R100,000. In the absence of a supported business valuation, where the assumptions could be explained, my husband and I said we still felt that this is too high. At this point, it seemed that the there would be no deal as we were not prepared to pay more than the price that supprted our valuations.</p> <p>The next day I received an email to say that all correspondence must go though him, the seller was also cc'd. I also received a voicemail saying that the seller said I requested a meeting with her and he will arrange the time. I did no such thing and in my opinion the deal was off. Afterwards, I received a call from the seller who wanted to discuss a few matters with me as she was concerned that I did not have all the information. She advised that the broker advised her not to call me and she needs to go through him. She called me anyway because she felt that the broker was not passing on all her information.</p> <p>We met with the seller again. The meeting went well. The broker seemed quite bored and tried to hurry the meeting. While we were talking, he interrupted to say he thinks we have all said what we needed to and we should sign the agreement. We advised we need to take the information away and come back to them. During the meeting we again asked for more detail on the valuation. To which all he said was this was not thumb sucked and a very good deal. If we didn't sign the agreement he would need to still market the business. This was fine with us.</p> <p>My husband and I reviewed the subsequent information and made a new offer which was still must lower than the seller's counter offer. I received a call from the broker to say that the seller accepted our offer. He completely forgot about our due diligence procedures and I reminded him of this. Again, he advised that he would have to still market the business, I said that was fine, but I have to carry out my procedures. He advised that I can go ahead and contact the seller to arrange my visit.</p> <p>I arrange my visit with the seller for the following week. Over the weekend, I sent her my procedures in advance to give her a heads up on the documents I want to see and meetings I intended on having. In my opinion, and audit history, these were normal procedures. The seller even responded to say that she will arrange a meeting with the landlord on Tuesday. On Monday morning, I received a call from the broker who said that the seller went through my procedures over the weekend and decided she does not want to sell to us anymore. I was very shocked. She seemed very keen on the Friday before. I asked why, he said he cannot go into that, she just doesn't want to sell to us. Then he actually said to me that he didn't know I sent her anything...he was the one who said to go ahead and arrange my visit.</p> <p>This is very unacceptable. He should at least give us a reason. This has left me with a very sceptical feeling about Aldes. Perhaps there are good explanations but its very strange that everything is hidden behind confidentiality. As it stands, and in my opinion:</p> <p>- The brokers do not understand the business valuations, nor can they explain it<br />- The valuations are thumb sucked, probably based on commission<br />- The brokers only pass information from the seller to the buyer if they feel it will meet their selling price<br />- The brokers are very pushy and will try to scam their buyers</p> <p>As I said, with everything being so "hidden", these are the feelings I am left with.</p> <p>The seller probably was intimidated by my procedures worried that we may find something we shouldn't or she was overwhelmed and just wanted an easy sale. Either way, some sort of explanation should have been given. Especially after we have invested so many hours in this business.</p> <p> </p> <p>I was given the contact email address for the general manager to take up this matter. He ignored my email.</p> <p> </p>