Asset buying can be a risky business. A portfolio’s history, age, origin, documentation and numerous other factors can mean the difference between profitability and failure. Gathering adequate information to evaluate a portfolio’s risk is essential. And while implementing and following a due diligence process doesn’t provide any guarantees, it does produce the details needed to make an educated decision. “Having a process in place reduces your business risk and maybe a lot of frustration,” said Carol Freeland, owner/principal of ACTS+ in Hot Springs Village, Ark. Dennis Malen, president and CEO of Malen & Associates, P.C. in Westbury, N. Y., believes any successful business must create a plan that incorporates procedures to insulate risk and focus on profitability. If a business model involves investments, asset buyers should develop a clear and concise understanding of the necessary due diligence initiatives before any investment opportunity is seized upon. “To do [due diligence] or not to consider due diligence would be the difference between an educated guess and pure gambling,” Malen said. While due diligence does not guarantee a successful sale or purchase, the due diligence process helps ensure buyers are getting the most for their money. “Due diligence minimizes the risk of buyers overpaying for debt and overestimating the collectability of an account,” said Mike Varrichio, ACA Asset Buyers Division Committee chair and president and CEO of Global Acceptance Credit Company in Arlington, Texas. To prevent any unwanted surprises, buyers should thoroughly review all items before the sale is complete. “Due diligence is one of the few ways debt buyers can truly protect themselves,” said Michael Taulbee, managing director of Aztec Management Partners, LLC in Portsmouth, Va.
The Due Diligence Process
Asset buyers should conduct due diligence on the portfolio
under consideration as well as the people with whom you are doing
business. Both are critical to the success of the due diligence process.
Portfolio Due Diligence
Buyers must have a process in place to gather general information
about each portfolio they consider. To begin the process, buyers
should develop a due diligence questionnaire to generate responses
from the seller.
ACA International’s Asset Buyers Division Due Diligence Guidelines
helps both first-time and seasoned buyers achieve this goal. The
guidelines were developed by industry professionals within ACA’s
Asset Buyers Division membership group and were designed to
provide a solid foundation for successful debt purchasing and
selling. The guide contains a due diligence questionnaire filled with
time-tested components that should be considered in developing a
personalized due diligence program that fits the individual needs of
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