Stout’s Financial Due Diligence team performed buy-side advisory services for a private equity client related to its platform acquisition of a business that performs restoration services. Headquartered in Minnesota, the business is a leading Midwest company specializing in building facade restoration, parking deck restoration, waterproofing, and other various repair work. Its customers include both commercial and governmental entities with services focused on external building repairs and restoration.

Our Financial Due Diligence team provided support throughout the entire transaction process. The key deliverables included quality-of-earnings analysis and a supporting report, net working capital analysis, and purchase agreement support. The business has experienced strong growth over the past several years, and our process was key to understanding drivers of growth, key projects, margins, and more.

A key focus area was revenue recognition and billing on projects. The business performs projects that can range from several months to larger projects exceeding a year, often with various add-on projects over time. Reported revenue was recognized on a billing’s basis; therefore, our work included converting revenue recognition to be based on a percentage-of-completion method of accounting. Using historical job data analyzed in diligence, with the benefit of hindsight, we performed a lookback analysis on completed jobs to recast revenue along with assessing cost and margin estimates for any open jobs.

Additionally, our analysis included identifying various GAAP adjustments to interim period financials and normalizing certain expenses. The findings drove key implications to the client’s financial model and negotiations for the deal.

In addition, our Tax Due Diligence team supported the project from a tax perspective. The overall outcome was a successful acquisition and a smooth process for the client.