Financial problem regarding acquistion of company

Question

My Company paid an extremely higher price for the acquisition of other company; the price was recommended through the valuation of an investment bank. Now we have financial problems. So is there any way to make this bank legally responsible for such situation?

Answer 1

I must say no. The investment bank does a valuation as per to the expected value of the flows the company could produce and its risk. What an investment bank gives is a valuation and not a “price of valuation.” There responsibility for the price lies along with the company that realizes the offer.

To assign a valuation a frequent error is to an investment bank without getting involved and only waiting for the valuation report. Evidently, such a valuation considers only the value of the company as per to the investment bank’s forecasts upon the economy, the company and the sector and according to the risk estimation of the company, also realized through the investment bank. A helpful and relevant valuation to the executives of a company depends upon the expectation of these executives.