Financial advisory services streamline M&A transaction for client
Financial advisory services streamline M&A transaction for client
Selecting a single financial advisory provider for an M&A transaction can provide many benefits, including streamlined workflows and cross-team collaboration. During an acquisition by a private equity buyer, Stout was engaged for a variety of financial advisory services pre- and post-transaction.
Client: A sustainable technology provider being carved out of a large public company
Business Valuation: Tax-Related Valuation and Purchase Price Allocation
Stout was initially engaged by the Client for a pre-transaction valuation of certain legal entities of the overall business. This allowed the client to understand the expected tax repercussions prior to the transaction closing. Following the acquisition, Stout performed a purchase price allocation, attributing the total invested capital to inventory, tangible assets, trade names and trademarks, technology, customer backlog, and customer relationships.
Notably, Stout’s work with the client spanned about a year and a half throughout the pandemic, and valuations needed to factor in ever-changing developments in the global economy and industry as well as overcome churn within the portfolio managers at the private equity buyer. Because of the time frame, any revisions to the business strategy, projected financial information, and opening balance sheet needed to be fully incorporated throughout the process and across service lines.
Accounting and Reporting Advisory: Purchase Accounting, Complex Debt & Equity, Lease Accounting
Based on Stout’s long-standing relationship with senior leaders of the Client, and as part of initial conversations to scope our valuation of the transaction, the Client expressed a need for additional technical accounting expertise and bandwidth. As a result, Stout’s Accounting & Reporting Advisory team was introduced to the Client. The Client selected Stout to assist with the purchase accounting work, including the preparation of a closing-to-opening balance sheet reconciliation and technical accounting memorandum related to the acquisition. The Client subsequently articulated a need related to the implementation of the new lease accounting standard, ASC 842, as well as assistance around accounting for preferred stock.
The Client’s lease accounting situation was especially unique since it had previously been a subsidiary of a large public company that had already implemented lease accounting. However, due to its size in relation to its prior parent, the procedures its parent performed related to its adoption of ASC 842 were not required at the Client level. As such, the Client, now a standalone entity, was required to implement the standard in line with its prior parent’s adoption date.
Benefits of Selecting a Single Firm
As a provider of multiple services, we were able to help the Client realize several synergies. We project-managed the engagement, which included a weekly, recurring call to ensure all stakeholders (both internal and external) were aligned and moving the overall project forward. Having a single point of contact created efficiencies; for example, the accounting team was able to communicate with the valuation team internally rather than requiring all communication to flow through the Client (which would have been the case had another specialist been chosen).
In addition to this, accounting team members working on the different workstreams consistently shared information and worksheets amongst themselves, aligning on multiple fronts so conversations with the Client and the Client’s auditor were efficient, allowing all parties to prioritize and focus on the most pressing matters that required timely resolution.
Ultimately, by selecting Stout as a single provider for multiple workstreams, the Client was able to realize the benefits of cross-team collaboration, continuity of service, and high-quality deliverables.