Stout provided buy-side financial services to a private equity platform business acquiring a Texas-based hydro-excavation services provider. The target business was a carve-out of a larger parent organization.

The Stout Financial Due Diligence team performed quality-of-earnings analysis, net working capital, and net debt procedures. The Stout team assisted in various analyses, including a detailed headcount and compensation analysis, carve-out considerations, related party transactions, and more.

The carve-out work included understanding the services which were historically performed by the parent and were partially transitioned to the stand-alone business during the historical period. The analysis primarily related to a shared facility, sales to the parent at below-market rates, management oversight, and benefits administration. The quality of earnings was crucial to the valuation process for the client.

In addition, Stout performed tax due diligence on the acquisition, and this included key analysis and support around federal income taxes and disregarded entity status, payroll taxes, sales, and use tax.