Often when the word “asset” is mentioned, the first thought that comes to mind is Cash, or Accounts Receivable, or Inventory, or Furniture, or Tools, etc. This is certainly not without merit but other things, objects, or tangibles can be assets as well. For example, this “other” asset can also be the person or persons behind the company balance sheet: the Founder(s), CEO(s), President(s), etc.
Let’s take for example a company that wants to purchase another company (for expansion purposes or to eliminate some competition). A Due Diligence is conducted and concludes that the target company is in a strong financial health position. This would appear a wise investment. But the real reason the company to be purchased is performing to that level is the management that is currently in place. If that management team is not on board with the buy-out, the transaction may not be as strong as previously thought. Most likely it would not and therefore it is the assets not present on the company balance sheet (i.e. the ‘human factor’) that are actually the most desirable.
When looking at any particular investment, you have to take into consideration the people behind the business as much as the business itself during its Due Diligence process.
Always make sure that you make an informed decision in all cases,
All the Best,