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Site Visits – Why Valuation Experts Prefer To Tour A Company’s Facilities

Posted in Business Valuation, on Apr 2018, By: Mark S. Gottlieb


We recently completed a complex valuation analysis of a food manufacturing company and its affiliates for a shareholder oppression case. The circumstances of the matter was well published in the New York Metropolitan newspapers and of course the internet. In this instance, we opined to the value of a minority interest. The discovery process yielded a plethora of documents that included, but was not limited to tax returns, general ledgers, financial statements, loan documents, etc. The minority shareholder (whose interest we were valuing) worked in the business for over twenty years. Armed with a completed questionnaire and an excessive amount of discovery we prepared our valuation report.

During the course of this assignment we asked to schedule a field visit, but the owners comprising the remaining shares did not consent. After numerous letters between the parties, we documented (for future use) our request and their opposing resistance.

Since we were able to corroborate our observations about the business we concluded there was no scope limitation to prevent us from completing the assignment. That being said, I sat with our staff to discuss the engagement before the issue of our report and asked – Why did we push so hard for a field visit?

For those of you that are experienced litigators, you won’t be surprised by my initial answer – which was simply, I didn’t want to testify that a field visit was not conducted.

Putting that aside, I thought this week’s blog would be a great opportunity to discuss why business valuation experts prefer to conduct a field visit.

What Are Experts Looking For?
When valuation experts tour facilities, they’re looking for conditions that may affect the company’s earnings or increase its risks that may not be evident from a completed questionnaire or document submission. These items may include, but are not limited to:

  • Are the company’s property, plant and equipment in good condition?
  • Do any fixed assets or inventory appear to be non-operating, idle, obsolete or damaged?
  • Do the company’s operations appear to be organized and efficient?
  • How are working conditions? Is the facility clean and uncluttered? Do workers seem productive, or overworked and under unusual stress to perform?
  • Are there any capacity constraints that might hamper the company’s ability to handle future growth?
  • What’s the skill level of the company’s employees and managers?
  • How is staff morale? Do any employees or managers appear to be disgruntled or adversarial?
  • Are there any obvious environmental issues, such as pollution or questionable storage or disposal of toxic waste?
  • Does the company have adequate physical controls over assets, such as inventory, cash and equipment?
  • Are there any discrepancies between the information testified to at a deposition verses site visit observations?

Opportunity To Speak With Employees Other Than Those Directly Connected With The Valuation Assignment
Interviews with executives and other employees allow an expert to look beyond a company’s historical financial statements to factors that affect its future earning potential. Interviews allow the valuation professional to assess the quality of a company’s management team and other key employees, providing insights that formal titles and organizational charts don’t reveal.

For example, is management “thin”? That is, does the company rely heavily on the owner, the CEO or a small group of key employees, increasing its risk? If so, the expert will consider whether the company has taken steps to mitigate this risk, such as initiating employment contracts, non-compete agreements and well-designed succession plans.

Another key area of inquiry involves the strength of the company’s customer and supplier relationships. An expert will inquire about customer retention rates, formal long-term contracts and customer concentration risks. Relationships that depend on personal relationships with the owner or outside referrals may warrant an adjustment to the company’s value.

Experts will also inquire about the company’s competition, intellectual property rights, technology, brand-name strength, product development and strategies for reducing competitive risk.

Indispensable tools
Site visits and management interviews can provide information — both positive and negative — that a company’s books and records may never reveal. Investing the necessary time and effort almost always pays dividends in the form of a more accurate valuation report that carries more weight with courts and other users.

For additional information on site visits or any other issues related to business valuation, forensic accounting or litigation support please feel free to contact our office at the above phone numbers. You can also email our office at for immediate assistance.