Stout provided buy-side financial and tax due diligence services for a private equity-backed portfolio company specializing in highly engineered metal alloys and materials. The acquisition target was a manufacturer of high-quality metal processing and cladding primarily servicing companies that sell to the U.S. government.

Our Financial Due Diligence (FDD) team performed a quality-of-earnings, net working capital, and net debt analysis while working closely with the private equity and portfolio company teams. Our FDD team focused on analyzing normalized EBITDA, including assessing senior management run-rate compensation and a reversal of non-operational / personal expenses, understanding inventory valuation policies and inventory aging profile, and identifying deviations from GAAP and any potential implications to earnings.

In conjunction with our quality-of-earnings analysis, our FDD team created a detailed analysis of purchases and relief of inventory to restate monthly cost of goods sold and ending inventory, as well as an analysis of slow-moving/excess inventory at a product/SKU level to assess potential inventory valuation considerations under the portfolio company’s ownership.

Additionally, our Tax Due Diligence team performed comprehensive tax due diligence on income, sales, payroll and property taxes, including working with the portfolio company to mitigate the risk of potential tax exposures identified.