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Financial Services Firms: Governance, Regulations, Valuations, Mergers, and Acquisitions, 3rd Edition by Zabihollah Rezaee

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Chapter Twelve

Internal Characteristics Assessment

The financial analysis described in Chapter 11 provides extensive insight into the characteristics of the banking company being valued. The numbers, however, do not tell the full story. To understand the bank completely, it is necessary to analyze the internal characteristics of the institution. It is these internal characteristics that create the financial performance. Consequently, an assessment of the business behind the numbers is essential to a thorough and accurate valuation.

The requirements for a proper internal characteristics assessment are fairly easy to identify but more difficult to achieve. They are:

  • A complete financial profile. Based on publicly available data, a financial profile (as described in Chapter 11) should be developed prior to internal investigation.
  • Access to the bank being analyzed. Proper analysis cannot be undertaken without access to staff and records. Consequently, it is unlikely that the assessment can be undertaken much before the due diligence review.
  • A work plan to follow. Because acquisitions are time critical, it is necessary to have a definite plan of action, including areas to be analyzed, priorities, responsibilities, data required, and schedules.
  • Knowledge analysts. Banks are unique types of businesses, and the people undertaking an internal characteristics assessment should be experienced in bank analysis and terminology. The pressured time of an acquisition is not the proper forum ...

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