Asset misappropriation is the fraudulent use of a company's assets for personal benefit by a director, employee or related party — including embezzlement, expense fraud, fictitious supplier payments and theft of inventory. It is the most common form of occupational fraud, and its detection is a key objective in financial due diligence and forensic accounting reviews. In the context of a company acquisition, undetected misappropriation inflates reported earnings and reduces the quality of EBITDA, directly affecting the valuation and the accuracy of financial warranties.

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Example: due diligence on a Swiss wholesale distributor uncovers CHF 320,000 of personal travel expenses systematically charged to a fictitious supplier over three years. These are classified as non-recurring charges and excluded from normalised EBITDA, reducing the valuation base by CHF 320,000 and triggering specific warranty provisions in the SPA covering undisclosed management fraud.

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Hectelion identifies asset misappropriation through analytical and forensic procedures integrated into our financial due diligence engagements.