Edgewood Systems

FORENSIC BUSINESS AND FINANCIAL ANALYSIS

Forensic ( adj ) is "relating to the application of scientific knowledge to legal problems" . 

Forensic Business Analysis (FBA) is much broader and more complex than forensic accounting, but the legal intrigue is there. It requires a deep experience with not just the numbers of the business but how they interact and fit together. Just knowing the numbers is not enough. You need the dynamics and the changing relationships of how deals are made. And some inside knowledge is invaluable.

The actual situation that prompted the creation of FBA was a divorce proceeding. When it came time to divide all the family assets, one spouse stated that the value of shares in his entrepreneurial company could not be determined; it was not publicly traded.

Balderdash! At minimum you can do an estimate of current and future cash flows. Furthermore, he failed to disclose that the company had a suitor, and that they had tried before to sell the company. The company sold for a sizeable sum five months later, after the divorce was final.

Unfortunately the divorce attorney did not understand the business facts and did not question more deeply.

By piecing together a trail of investors blog comments, industry news and obscure SEC filings, it was clear that the spouse knew the share value and lied.