Stout provided buy-side financial and tax due diligence services to a strategic buyer. Through five operating entities and six real estate entities, the business performs heavy construction work primarily related to road and bridge projects for state and local governments. In addition, the business manufactures and distributes ready-mixed concrete, aggregates, landscape materials, and more for the construction industry.

The Stout financial due diligence team performed quality-of-earnings analysis and net working capital procedures. The Stout team assisted in preparing a consolidation, including eliminating entries which had not historically been fully performed. The business recognized revenue under the percentage-of-completion method of accounting, and this was further analyzed in diligence through a lookback analysis on jobs and recasting of revenue, resulting in a significant adjustment to EBITDA. In addition, analysis was performed on specific construction projects with elevated margin which benefited amid the onset of COVID in March 2020 due to sharp shifts in commodity prices and road closures.

The complex multi-entity, multi-owner structure of the target companies required a focused effort to efficiently deliver tax diligence. Stout performed tax due diligence on the acquisition, including key analysis and steps around the proposed F reorganization, S-Corp elections, state and local tax filings, sales and use tax, and more.