Every now and then, it happens. Warning lights are on, crossing arms are down and alarms are sounding and yet… over eager buyers for high-end, late model used MRI systems, just can’t resist the temptation of what seems like a great deal. Contracts are signed, deposit money wired and then… voila! In the end, no machines and no refunds.
UNLESS you have a solid set of rules that you will NOT violate no matter how good the deal sounds. And, in this case, we’re not talking rookie buyers here either.
Here’s what happened…
A company in Europe no one had ever heard of was offering some very nice CT and MRI equipment that any dealer in the second hand world would love to have. The prices attached to these systems were very attractive indeed so we, like others, had to poke around.
You gotta have rules you will NOT break...
Our European office picked up on this offer, presented it to us back in the USA at which time we employed the same 5 Rules of Due Diligence we do with any possible purchase.
- Evaluate the Seller: Who are they? Have we done business with them before? How did it go? Would we wire money to them without worrying?
- Evaluate the Equipment: Is specification reasonable? Complete? Properly presented?
- Evaluate the Price: If an asking price is posted does it fairly reflect the market? Crazy high? Too good to be true?
- Consider the Seller’s “story”: How and why is equipment being sold? Any contingencies, liens or angry landlords?
- Evaluate other complexities: Deinstallation, rigging, trucking, crating and export… Any deal breakers?
Due Diligence Up to Par? Pass “Go” and collect $200…
If the prospective purchase passes the 5 rule test above, then you have a pretty good chance of a happy transaction! Of course, when difficulties occur (and they inevitably will from time to time) it is always good to know how the Seller will behave. Pretty hard to know until you are in the thick of things UNLESS you are proactively checking with experts in the industry for references. Asking for references from the Seller is always a good policy. And if they are also of reasonable size, have some brick and mortar and their own “paid for” inventory, that’s a bonus too!
Due Diligence is Not Up to Par? You Gotta Walk Away…
In our Due Diligence review of the European Company mentioned above, the facts just didn’t add up. Our people were really excited about the prospect of getting some or all of this equipment as several of the systems were rarer than hen’s teeth. We set out to assess the wherewithal of the Seller since no one had ever heard of them before. We traced their name back to a legitimate German entity but trying to follow the corporate trail became a little dicey. Somehow they were linked to a Russian company and at least one or two of the imaging centers were in Germany. The specification seemed reasonable enough but the Seller would not let us inspect the equipment and was demanding an inordinately large deposit. This was a huge danger sign since no legitimate owner of equipment would prohibit a real buyer from inspecting the equipment they were looking to buy. Combine this with demand for a large deposit and full payment before setting eyes on the equipment and you have plenty of reasons for concern. Our in-house counsel ran up and down a number of rabbit trails trying to validate the company and their ownership of this equipment but could not. Finally, we suggested the OEM be brought in to help get us more comfortable since, presumably, they would know of the equipment and its service history.
And then when the Seller refused to work with or talk to the OEM, that was the proverbial last straw. We walked... some did not!
We could not get past Due Diligence Rules #1 and #4 and thus exited the deal much to the dismay of several team members.
Now the news reports are out…
Several would be buyers sent deposits and found out the sellers were scammers. There was no real company that owned anything and the bad guys got the money while the victims were left to shake their fists holding worthless contracts and bank wire receipts into the air.
Never, ever compromise the rules you decide are non-negotiable…
So before you find yourself in a similar situation, know your non-negotiable rules, conduct a thorough due diligence review in every deal and ask lots of questions. If you stand firm, and never, ever compromise the rules, your odds of a successful buy go through the roof. If it seems too good to be true, it almost always is.
Let us know if you have questions or want to know more about this particular company in Europe. We decided it wasn’t even worth mentioning their name since they (and others similar to them) will continually change company names and pop back up to prey on eager buyers. We’re here to help educate, share our expertise, and hopefully raise the level of awareness and integrity in an industry that we love and care too much about to let this kind of dishonest activity continue.
Meet the author - Bruce Block