Stout provided buy-side financial due diligence services for a private equity-backed top 50 accounting firm that provides tax, audit, and advisory services. The acquisition target was a tax, audit, and advisory firm based in the Midwest that expanded the Company’s geographic footprint into a new regional market.

Our Financial Due Diligence (FDD) team performed a quality-of-earnings, business performance, net working capital, and net debt analysis to assist the Company in assessing the valuation of the acquisition target and supporting the closing of the transaction. Our FDD team focused on normalized EBITDA through various analyses, including adjustments for non-recurring and non-operational items, partner scrape under the Company’s future compensation model, revenue recognition, and cash-to-accrual adjustments.

Additionally, we performed a detailed analysis of client performance trends, including client concentration, churn, pricing, and realization rates to assess the sustainability and quality of the target’s revenue base. Our FDD team developed an adjusted profit and loss statement that allowed the Company to assess the business’ adjusted performance inclusive of the adjustments identified through the quality-of-earnings analysis.

We also provided additional support with respect to the purchase agreement, including developing the working capital target, structuring the closing working capital and indebtedness estimates, and drafting various financial terms and exhibits.