Stout’s Financial Due Diligence and Investment Banking teams partnered in performing sell-side advisory services to a private equity firm related to its divestiture of a leading full-service, multi-trade industrial services contractor serving some of the fastest-growing industries in North America.

The company delivers design and engineering, fabrication, installation, and maintenance services across various commercial and industrial applications. Its broad portfolio of services includes piping, HVAC, conveyance systems, and electrical systems, among others, with capabilities spanning from large design/fab/install projects for new builds to recurring maintenance services.

Stout Financial Due Diligence provided support throughout the entire transaction process. Key deliverables included quality-of-earnings analysis and a supporting report, net-working-capital analysis, assistance during diligence calls with potential buyers, and purchase agreement support. The Stout Investment Banking team also supported the client with sell-side advisory services through this process. The business has experienced tremendous growth over the past several years in which our process was key, as it bridged the drivers of growth, key projects, margin drivers, and more.

A key focus area was revenue recognition. The company performs projects which can range from several months to multi-year engagements across multiple international locations. Revenue is recognized under the percentage-of-completion method of accounting, which relies on significant estimates surrounding the cost to complete a project.

The historical job data is analyzed in diligence with the benefit of hindsight to perform a lookback analysis on completed jobs to recast revenue along with assessing any conservativity on open jobs. Additionally, our analysis included identifying various GAAP adjustments to interim period financials and normalizing certain expenses.

Our team was closely involved in the review of the purchase agreement terms, including providing critical feedback and preparation of exhibits supporting net working capital and its agreed-upon target for delivery at closing.

The project resulted in a successful outcome for the company and a collaborative partnership between the Stout Financial Diligence and Investment Banking teams.