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"Not enough emphasis is placed upon the importance of the bill of sale and the chain of title," [Dennis Malen] said. "In addition, the list of accounts attached to and made reference to in the bill of sale must provide an easily identifiable connection to the bill of sale supporting the proposition that those accounts belong to the respective bill of sale in order to help substantiate ownership when involved in litigation. Each bill of sale in the chain of title must be obtained with signatures that belong to an individual who is identified as possessing either real or apparent authority in order to bind the seller.""If it were important for you to know about the educational qualifications of top management, for example, it is not enough for any of them to state that they went to college or to answer 'yes' to such a question on your due diligence survey or have a diploma on the wall," she said. "If it is important, you'll find out what college, the year of graduation and major. Then you'll call the college to confirm it all.""Twelve years ago, when we first started, we knew less about the business and performed less due diligence and were securing more profitable transactions," [Mike Varrichio] said. "Today's market is highly competitive and much more complex."
Due diligence provides asset buyers the background needed to reduce risk and increase profitability. By Kim Rath 18 I November 2009 Collector A sset 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 the buyer. November 2009 Collector I 19 As part of the portfolio due diligence or apparent authority in order to bind buyers should determine whether the process, general information about
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