A higher-education technology provider specializing in managed services, IT outsourcing, cybersecurity, and business intelligence solutions (the “Company”), serving 20 higher-education institutions across the U.S., was acquired by a leading private equity group (the “Sponsor”). As a result of the acquisition, the Company faced a CFO transition, new lender compliance requirements, and additional scrutiny on accounting compliance (i.e., U.S. GAAP) to facilitate a future audit. Furthermore, the Sponsor requested deeper insights into the Company’s liquidity and a more robust management reporting and analysis (MD&A) package.

Stout was engaged to provide comprehensive integration and reporting services to address the demands of private equity ownership effectively.

Lender Compliance

We applied our extensive experience with complex credit agreements to identify and define the Company’s compliance requirements, ensuring alignment with lender’s expectations. This included establishing a process to facilitate debt covenant accuracy and defining lender-adjusted EBITDA. By providing clear guidance, we helped the Company navigate the complexities of its credit agreement and establish a strong framework for sustained compliance.

Using the Company’s existing financial data, we developed a comprehensive lender reporting package designed to streamline the tracking of unique and complex adjusted EBITDA addbacks. We executed the completion of the Company’s first four months of lender reporting, including the first quarter of covenant review, ensuring accuracy and meeting critical deadlines.

The reporting package was designed to be handed over to the newly hired CFO, accompanied by a comprehensive, easy-to-follow step by step guide. For the past five months, the new CFO has successfully prepared the lender reporting package with minimal assistance from our team, ensuring compliance.

Three Statement Forecast Model & 13 Week Cash Flow

Post-acquisition, the Company was reliant on the Sponsor’s high-level, long-term investment forecast to track and assess the Company’s performance against plan. As such, the Sponsor quickly sought to establish an annual integrated forecast to better explain key short term performance drivers within the context of the longer-term plan.

We compartmentalized the long-term forecast into an annual view as a starting point. We then worked with key process owners across finance, operations, and the Sponsor to build up an annual revenue forecast grounded in specific customers, pipeline, and anticipated expansion.

Similarly, we incorporated a sophisticated suite of expense drivers and modules (both variable and fixed) to better outline the relationship between top line and operational performance. Finally, once a preliminary view of fiscal year cash flow was established, we and the Sponsor outlined and incorporated key capital expenditures required to enhance growth. Where gaps between the Sponsor’s long-term forecast and the annual plan existed, we help arbitrate the optimal path forward.

Once the annual three statement forecast was established, we established an integrated 13-week cash flow model based on the annual forecast. We aligned key customer and vendor DSO / DPO metrics to better define the timing of cash inflows and outflows on a short-term basis. We also worked with the Company to ensure long term, material payments were planned for accurately.

The 13-week cash flow model was developed as a reusable tool, incorporating input from both the Sponsor and the Company. The Sponsor has consistently updated the cash flow forecast on a weekly basis since receiving the model, allowing for tactical short-term budget versus actual performance adaptability.

Management Reporting

We performed the integration of a MD&A within the Lender reporting package facilitate performance to covenant alignment and drive further insights. This included monthly and year to date profit and loss (P&L), balance sheet, and cash flow statements with a comparison analysis to budget and prior year (building off the three statement modeling exercise). Additionally, the Sponsor sought enhanced visibility into the trailing twelve months (TTM) P&L for a more comprehensive financial overview and comparison.

GAAP Compliance and Technical Accounting

Along with addressing lender compliance and management reporting requirements, the Company required assistance with acquisition-related purchase price accounting under ASC 805.

To start, we efficiently compiled the Sponsor’s closing statement in accordance with the terms of the purchase agreement, delivering all required documentation in a timely manner. We then provided comprehensive ASC 805 technical accounting services, including preparation of the Company’s opening balance sheet and documentation to support key accounting conclusions. Purchase price accounting valuation services were also provided to determine the fair value of certain acquired assets, intangible assets, contingent consideration, and goodwill.

Additionally, we identified potential accounting deviations from U.S. GAAP (ASC 606) requiring further assessment. We reviewed all of the Company’s existing contracts top to bottom to ensure accurate revenue accounting. Once we and the Company were aligned on the technical components of the ASC 606, we proposed a set of required adjusting journal entries and created an easy-to-use revenue tracker / month-end close reconciliation workpaper.

Stout as a Partner

In addition to delivering technical expertise and tailored reporting solutions, we served as a partner to the Company and the Sponsor throughout the engagement. By fostering a collaborative environment and maintaining open communication, we provided key deliverables tailored to meet the unique needs of the Sponsor and Company during the post-acquisition phase.

This partnership reflects Stout’s commitment to building trust and delivering value, enabling the Company and Sponsor to confidently navigate the complexities of private equity ownership.