Stout performed finance function stabilization for a private equity (PE) portfolio company in the construction industry.

The Problem: Limited Visibility in the Finance Function

A private equity firm acquired a construction company for its first platform for a newly formed fund. The PE firm quickly realized the finance function of the acquired company would struggle to meet the demands of the new operating environment due to pervasive issues across people, process, and technology. Numerous deficiencies across order-to-cash, procure-to-pay, and record-to-report limited visibility into the financial performance of the company.

Our Solution: An Integrated Approach

Stout’s Finance Integration team met with the PE firm’s operating team to understand the acquisition terms, deal thesis, and integration support needed to stabilize the acquiree’s finance function and optimize its current state reporting.

Our team conducted interviews with the leadership of the acquired company to understand the detailed current state of the finance function and identify process gaps and opportunities. We utilized a rapid assessment approach to examine the following:

• Order-to-cash: Customer management, order and invoice management, revenue management, accounts receivable reporting and analysis, etc.
• Procure-to-pay: Sourcing and contracting, requisition and procurement, invoice processing and payment, accounts payable reporting and analysis, etc.
• Record-to-report: Subledger and general ledger close, financial consolidation process, month-end reporting, etc.

We leveraged the results of the assessment to capture detailed observations, measured the magnitude of key risks, and developed tactical recommendations to harmonize and optimize the finance function.

After reviewing Stout’s report, the PE firm determined an immediate priority of gaining enhanced visibility into the financial performance of the acquired company.

The Finance Integration team was tasked to stand up the reporting process to meet compliance with United States Generally Accepted Accounting Principles (U.S. GAAP) while the PE firm focused on filling the other tactical gaps identified in the assessment.

Stout quickly mobilized a team of finance and accounting specialists to help provide the following services:

1. Creation of month-end close checklist
2. Compilation and reconciliation of the closing financial statements of the legacy entity
3. Preparation of the opening balance sheet for the post-acquisition entity, including ASC 805 analysis and purchase price accounting entries
4. Compilation and reconciliation of the financial statements for the acquired entity’s first reporting period
5. Preparation of acquisition and clean up journal entries to post in the enterprise resource planning (ERP) system at the various relevant periods to true up the entity’s financial data within its system for ongoing reporting needs
6. Onboarding of the new finance leadership of the acquired entity
7. On going ad-hoc support to assist the newly created finance function

The Outcome

As a result of the work above, the PE firm quickly gained visibility into the acquired company’s financial performance. The acquired company was also able to integrate the reporting model and reconciliation procedures into its reporting process to immediately improve its efficiency and financial data quality.

Stout as a Partner

As a result of the engagement, Stout serves as a critical partner driving reporting efforts across the entity and preparing the company for success in any future strategic transactions. Our efforts showcased our broad set of services and ability to stay agile with ever-changing complexities and limitations of newly acquired companies. Stout strategically supported the PE firm and its strategic priorities while executing that strategy tactically when necessary.

With Stout’s support, the company’s leadership now has the capacity and tools needed to focus on the strategic direction for the business while having confidence in its finance function and reporting data.