Forecast challenges

Viewing 7 posts - 1 through 7 (of 7 total)
  • Author
    Posts
  • #36434
    Faisal Juhani
    Participant

    In a volatile market, how would you overcome the forecast challenges during the Financial DD especially when you don’t have enough historical data?

    #51373
    Mohanad Alzughaibi
    Participant

    I would assume you should have multiple scenarios.

    #52156
    Nathan Taylor
    Participant

    Agreed, you should construct models based on various scenarios (base, high, low) but ultimately you can never eliminate risk from poor forecasting. With limited historical data, commercial due diligence takes on an even greater role as it’s the only form of DD that is future looking.

    #52847
    Christopher Twible
    Participant

    I am facing that problem right now with COVID. It’s hard to believe any forecast given the changing nature of COVID and its impact on some industries. Volumes looked like they were recovering until Omicrom hit. I think buyers have a lot more execution risk right now and determining value is hard. Might be a short term problem but think some long term trends are starting to emerge. Think we need more scenarios!

    #55778
    Yanxuan Yang
    Participant

    I agree that modelling scenarios will help. In addition, if it comes to a point where it is too challenging to factor in various assumptions or if there are too many nuances to consider, perhaps it would also be good to apply an overall discount or to structure the transaction in stages.

    #56112
    Markus Gustafsson
    Participant

    In addition to model different scenarios. I would like to hear good explanations from management, preferably by numbers, why the actuals deviates from the forecast.

    #56187

    Putting scenarios is essential to understand how things will move in each possibility. Another key factor is bring in a third party experienced team and have their inputs with that regard. These inputs shall be validated internally by experienced personals as well.

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