Liabilities

Liabilities are a company's present obligations — financial, legal or constructive — arising from past events, whose settlement is expected to result in an outflow of economic resources. They are classified as current (due within 12 months: trade payables, short-term debt, accruals) or non-current (long-term bank debt, bonds, pension obligations, deferred tax). In financial due diligence, exhaustive liability identification — including off-balance-sheet obligations — is essential to determine the true net debt position and the equity value bridge. Undisclosed or understated liabilities are a primary source of post-closing price adjustments and warranty claims.

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Example: due diligence on a Swiss manufacturing company reveals CHF 1.8 million of unrecorded liabilities: CHF 680,000 of unprovided accrued payroll, CHF 420,000 of underestimated warranty provisions and CHF 700,000 of contingent environmental obligations. These restatements increase total liabilities by CHF 1.8 million, reducing normalised net assets and triggering a corresponding reduction in the acquisition price via the completion accounts mechanism.

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Hectelion identifies and quantifies all liabilities — including off-balance-sheet obligations — in every financial due diligence to ensure an accurate equity value bridge.