Peterson Valve Company should perform suitable procedures to ensure that they have link to Milagrol LTDA information and all the risks they are being exposed to. The information should be collected and analyzed by an expert to ensure that Peterson Valve Company makes the right…
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My paper discusses some political risks, the implications, methods of valuation of stock, and risks associated with buying a business.
Peterson Valve Company is interested in Milagrol LTDA because he thought of diversifying its operations globally and to gain access to processes that would be costly to develop. Milagrol LTDA needed the capital to support research and development to expand the business and they believed in venturing into a merger to be able to manage the research to expand the business. Milagrol was an already established company and had its share value in the market so Peterson did not have to start from scratch to develop the company.
In buying a business an investor has to ensure that they have access to all important information about the company being bought, this way they can assess the potential risks associated with buying it and the real value of the business (Juha, 2008). Accessing all information of the company involves checking all the dimensions of the business such as financial performance, legal and tax compliance, contracts, property and rights and all assets and liabilities within a specified period of time (Miller, 1992). Some of the risks involved include changes in the branding of the company. These information will be crucial in making the buying decision and also help the values in reaching to a final method of stock valuation. The customers of Milagrol LTDA may have problems with a change in the management. Smart accountants can hide items such as debts of the company from the balance sheet and some of the expenses from the income statement hence acquiring a business with accumulated debts. Consider the possibility of transferring losses from the old company to the newly acquired business, the practice of moving the business assets allows the newly acquired management to differentiate assets that they can develop from long term and short term losses.
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