A global airport supply chain services provider (the “Company”) contracting across approximately 25 commercial airports and two countries was acquired by a leading private equity group (the “Sponsor”). Post-acquisition, the Company sought guidance on developing an accelerated close process while upgrading financial reporting from prioritizing compliance to providing strategic business insights. Additionally, the Company was navigating a CFO transition, new lender compliance requirements, and a new audit partner.

Stout was engaged to deliver full integration and reporting services to quickly meet the demands of private equity ownership.

Rapid Assessment

Our first step was to understand the detailed current state of the finance function and identify process gaps and opportunities. We utilized Stout’s rapid assessment approach to examine the following:

• Order to cash: Customer management, order and invoice management, revenue management, accounts receivable reporting and analysis, etc.
• Procure to pay: Sourcing and contracting, requisition and procurement, invoice processing and payment, accounts payable reporting and analysis, etc.
• Record to report: Subledger and general ledger close, financial consolidation process, month-end reporting, etc.

Additionally, we leveraged the results of the assessment to capture detailed observations, measured the magnitude of key risks, and developed tactical recommendations to harmonize and enhance the Company’s current processes. Anticipating a key-person risk pertaining to the exiting CFO, we outlined immediate priorities for transition and delegation to position the new CFO for success.

With a new CFO onboarded, we worked directly with the finance team, accounting staff, and private equity operating partner to develop a detailed roadmap to execute on process upgrades and CFO transition tasks along an agreed-upon timeline.

Lender Compliance

We leveraged experience navigating the complexities of credit agreements to outline the required compliance needs, the debt covenant calculations, and lender defined adjusted EBITDA. Additionally, we worked with the Sponsor and Sponsor’s legal team to interpret and solidify areas of the credit agreement that left room for ambiguity.

We enhanced the Company’s existing financial data to create a lender reporting package engineered to simplify the tracking of unique and complicated adjusted EBITDA addbacks. After validating the resulting covenant ratios against the expected underwriting, we executed the completion of the Company’s first three quarters of lender reporting.

GAAP Compliance and Technical Accounting

In addition to the lender compliance, the Company needed assistance completing acquisition-related purchase price accounting under U.S. GAAP (ASC 805). We were able to provide all ASC 805 services, including a valuation of the company’s fixed and intangible assets, preparation of the Company’s opening balance sheet (OBS), and documentation to support key accounting conclusions. Further, once the OBS was set, we prepared the necessary OBS and stub period journal entries in the Company’s system to ensure accuracy.

During the rapid assessment phase of the project, we flagged potential material deviations from GAAP that would likely pose issues with the Company’s new audit partner – namely, lease accounting and an investment in a foreign entity. We reviewed the Company’s lease portfolio to ensure all leases and lease accounting conclusions were captured under ASC 842 and built a lease calculation and journal entry template for the Company.

To address the foreign entity investment, we reviewed the legal construction of the investment and conducted research into consolidation, variable interest entity (VIE), and equity method accounting to ensure the correct method of investment accounting was applied. Having confirmed the investment should be accounted for under the equity method, we provided a technical white paper to the Company’s auditors supporting the conclusion and journal entries to record the investment as of the acquisition date, and established a process to ensure the investment was properly accounted for on a go-forward basis.

Management Reporting

The Sponsor desired a timely upgrade in the key performance indicator (KPI) metrics provided by the Company to support iLEVEL reporting. We diligently outlined which KPIs were readily available, would need to be created, or would require long-term enhancement to consistently produce. Then we compiled or created, where necessary, the KPIs that could be produced with available data from the beginning of the proceeding financial year. For the KPIs that required long-term enhancement, we provided a roadmap for development and suggested technology enhancements to facilitate their production.

The Sponsor requested the Company prepare a full management discussion and analysis (MD&A) presentation for quarterly board reporting. To facilitate this need, we created an automated and easily refreshable reporting package that the Company’s finance team could leverage for board presentation preparation.

Beyond compiling the numbers, we collaborated with the Company to design and build reporting outputs that tied operational metrics by each facility to financial outcomes, such as airport efficiency metrics and cost of overtime labor. These reporting upgrades allowed the Company’s decision makers to obtain previously unavailable business insights into operational performance. Once the board deck structure was completed, we prepared instructional manuals and recorded trainings to transition the board deck preparation to the Company’s finance team.

Stout as a Partner

As a result of the engagement, we served as a critical partner to drive post-acquisition finance function improvement across a full suite of day one needs. Our efforts showcased our broad set of services and ability to act as a one-stop shop for a integration needs.

With our support, company leadership now has the capacity to focus on strategic direction for the business while having confidence in its finance function.