Client looking to buy another company.

Target company’s accounting records were weak and inaccurate.

Smith Schafer Approach

We discussed the problems with the attorney who was drafting the purchase documents on behalf of our client and it was decided to ask for expanded seller warranties regarding the financial records including the accuracy of the balance sheet as of the date of purchase. Seller financed approximately $150,000 of the sale price and we requested any breach of warrantee have the right of offset.

Results

Within six months it was determined inventory was overstated by $210,000 and bank floor plan debt and other liabilities were under stated by $170,000. The result was our client never paid the additional $150,000 due to the errors on the balance sheet which the seller had warranted as accurate. No court action resulted from our clients offset of his claim against the sellers receivable.

 

Smith Schafer Service

 

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