Performance Sports Group, which owns the Bauer and Easton brands, has been accused of fraud and stock market manipulation stemming from channel stuffing. Channel stuffing is more common than people think, and can occur in various forms / schemes. We see it most often in direct to affiliated retail and distributor arrangements in clothing, home goods, and tech, but it can happen in any industry, in a myriad of ways.
Detailed and professional due diligence can often identify various forms of channel stuffing early. Channel stuffing not only affects the accounts of public companies and their stock price but is also common in the sale of a privately held business in order to inflate revenue that will be subject to a negotiated multiple the parties agree upon for valuation. One example is a law firm that asked its clients for retainers in advance of anticipated work, using the retainer amounts to inflate sales and represent to an acquirer that the retainer amounts were part of services invoiced and collected, thus inflating the price paid by the acquirer. For more info, click here.
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Peter Barakett
President
DDC – Due Diligence Consulting LLC
DDC Investigations LLC