Construction Company Goes Bankrupt After Being Wrongfully Disbarred

Case Overview

This case involves a construction company that had several ongoing residential projects with a county. These projects were interrupted when the county wrongfully disbarred the construction company prohibiting them from bidding, contracting, subcontracting, or performing work on any residential project for a period of 8 years. As a result, the construction firm went out of business. While the firm was in the process of closing, most of the general ledger was lost. An expert in business valuation was sought to review the construction firm’s financials to estimate the value of the company before it ceased operations.

Questions to the Construction Safety expert and their responses

How often do you evaluate the worth of construction companies?

I value construction companies on a regular basis -- approximately 10-15 new construction company assignments monthly.

What sources of data might you use to provide a valuation of a construction company?

I am familiar with the financial performance of companies within the construction industry and how they perform historically and how they may perform in the future, along with a critical eye on the assessment of their various profit centers. As an experienced valuation professional, I am also accustomed to working with limited financial data, corporate documents, and contracts. It is not atypical for a company to have absent financial information. For example, I had a case of a sub-contractor electrical construction company that had changed accounting firms due to the death of their long-time accountant. The corporate returns from previous years were all lost or destroyed. Some Quickbooks data did survive though. Based on our ability to analyze those files, I was able to glean some useful information, such as sales and expenses. I was able to construct a limited recreation of the company's historical performance as well as construct a 5-year pro forma forecast via a series of interviews with key personnel and thorough examination of the facts and circumstances of the company's operations, financial performance, working capital analysis and profitability, debt obligations, such as bank and equipment loans, third-party and related party loans, any prior stock transactions, clientele, marketing, history of bidding, bidding process, client management, client retention, productivity, employee retention and performance, assessment of workers compensation and litigation claims, and overall project performance.

About the expert

This expert in business valuations has over a decade of experience in her field. She earned her BS and her BA from Michigan State University. This expert is certified in Distress Business Valuation and is an Accredited Senior Appraiser. She is active in numerous professional organizations, including the Association of Insolvency and Restructuring Advisors and the American Society of Appraisers where she serves on the Business Valuation Committee. This expert has formerly served as Director of Valuation Services for Valuation Advisory Services LLC and as Director of Tax Services for Strategic Tax Advisors Inc. She currently serves as Director of Financial and Valuation Opinions at a business valuation company.