A group of investors, led by Jason Elliot, is interested in buying VCL Inc. (VCL) a successful minor-league professional baseball team. The investors have owned a number of sporting goods stores in the past and they feel that owning a professional ball team would be a great fit with their business.
The partner tells you: “Please familiarize yourself with the information I have gathered on VCL. VCL’s financial statements for the past two years are show in (Exhibit I). Notes from both meetings are collected in Exhibit II.
Draft a memo to Mr. Elliot advising what specific due diligence procedures our firm will do as part of giving comfort in their purchase of VCL. No credit will be given for just saying get an audit done. Please calculate a preliminary purchase price for the shares for me to use in my meeting with the investors next week. Bear in mind that an earnings multiple of between 4 is common for companies owning minor-league professional baseball teams.” It is agreed that the statements are to be in accordance with ASPE.
If there is anything else you can think would add value for Jason to consider, please include in your analysis. Jason is wondering if you can provide any kind of assurance to provide comfort on the purchase