PE Firm Benefits From Using Single Provider Throughout M&A Lifecycle

PE Firm Benefits From Using Single Provider Throughout M&A Lifecycle

Stout provides synergy, technical insight, and efficient knowledge-sharing at key moments of deal execution.

November 01, 2022

During a recent acquisition, a long-standing private equity client of Stout experienced the value of partnering with a single financial advisory provider at various stages of the M&A lifecycle. Choosing a single provider resulted in additional benefits of synergy, technical insight, and efficient knowledge-sharing at key moments of deal execution.

Client: Private equity firm (the “Firm”) focused on partnering with entrepreneurs and managers while investing in and growing lower-middle-market companies, managing over $1.5 billion in committed capital

Acquiree: A global leader in the value-added distribution of original equipment and aftermarket automotive products for the transmission and driveline repair market (the “Acquiree”)

Financial Due Diligence

Based on a long-standing relationship between the Firm and senior professionals in Stout’s Financial Due Diligence practice, Stout was initially engaged to provide buy-side financial and tax due diligence services to the Firm during the acquisition process. Diligence was conducted on six legal entities across the United States and Canada. In addition to the standard quality of earnings and net working capital procedures, our work included the evaluation of numerous pro forma analyses around footprint rationalization, pricing optimization, and product offering changes. Analysis was also performed on the Acquiree’s methodologies around core accounting, a complex method of accounting specific to the aftermarket automotive industry.

Business Valuation

Understanding the requirements for every portfolio company to perform acquisition accounting procedures post-close, Stout’s Due Diligence team introduced the Firm to relevant colleagues in Stout’s Valuation Advisory practice. Post-diligence, additional Stout professionals were engaged and able to ramp quickly to assist the Firm with a purchase price allocation for the opening balance sheet to help them meet their financial reporting compliance requirements pursuant to Accounting Standards Codification (ASC) Topic 805 and the private company accounting alternative outlined in ASU No. 2014-18.

The scope of the project included the valuation of certain tangible assets across the Acquiree’s various legal entities, including owned real property and personal property. Intangible assets within the scope included various consumer and business-to-business trade names and trademarks, as well as developed technology.

We valued all assets outlined in our scope within management’s timeline, and the Acquiree was able to meet its financial reporting requirements. Given the strong relationship and credibility established with the Acquiree, Stout was subsequently engaged to perform additional valuation services in compliance with ASC Topic 718 related to certain share-based compensation awards that were granted following the initial transaction.

Accounting and Reporting Advisory

As a result of their interaction with the CFO and Controller of the Acquiree, Stout’s valuation team discovered the Acquiree had not yet implemented the newest accounting standard applicable to leases. Stout’s Accounting and Reporting Advisory team proceeded to assist the Acquiree with its implementation of ASC 842, Leases, which is effective for private companies with fiscal years beginning after December 15, 2021. The Acquiree was required to adopt the standard as of January 1, 2022, and the scope of the engagement was to assist the Acquiree with its implementation of the standard, including:

  • Identifying all contractual arrangements that met the definition of a lease in accordance with ASC 842
  • Abstracting all relevant data from each lease
  • Calculating the lease liability and right-of-use (ROU) asset for the client’s lease portfolio, including all transition and ongoing journal entries through the end of the lease terms
  • Drafting audit-ready technical accounting memoranda
  • Drafting the financial statement footnote disclosures
  • Creating a template for the client to leverage for lease arrangements entered into after adoption of the standard

Successful Outcome

A strong client relationship and collaborative approach from Stout produced successful outcomes prior to the transaction, during execution, and post-deal close. Our client understood that they could rely on continuity across the Stout team resulting in consistent, high-quality deliverables and efficiencies gained from knowledge and information-sharing throughout the transaction process.

Throughout the engagement, Stout delivered end-to-end insight and expertise across the M&A lifecycle by leveraging our full suite of services related to strategy, due diligence, execution and structuring, and integration.

Stout M&A Transaction Advisory Services


Strategy Due Diligence Execution/Structuring Integration
  • Acquisition Strategy Development
  • Strategic Alternative Assessment
  • Target Screening, Identification, & Pricing
  • Synergy Analysis
  • Sale preparedness
  • Financial Due Diligence
  • Data Analytics
  • Tax Diligence & Investigation
  • IT Due Diligence
  • IP Due Diligence
  • Financial Operations Assessment
  • Negotiation Support
  • Capital Markets
  • Tax Structuring
  • Fairness & Solvency Opinions
  • Accounting Structuring
  • Strategic Financial Planning & Analysis
  • Opening Balance Sheet & Valuation
  • Technical Accounting & Tax Provisioning
  • Internal Controls Advisory
  • Finance Integration
  • IT Post-Deal Close Services