Stout performed buy-side financial due diligence for a private equity-backed service company in the heating, ventilation, and air conditioning (HVAC) industry.

The acquisition target had significant long-term commercial installation contracts along with shorter-term residential installation and service contracts.

Stout performed extensive diligence procedures around the target’s revenue recognition. This was accomplished by aggregating revenue and costs by job (i.e., creating a jobs database) in order to perform a percentage of completion accounting “lookback” normalization including a detailed analysis to assess the current margin estimates on “open jobs”.

Stout’s analysis resulted in significant adjustments to EBITDA, allowing our client to renegotiate the purchase price.