Overview
A private equity firm engaged DLC during two business acquisitions to assist with closing preparations, including balance sheet, net working capital threshold calculation, and preparation for Management Discussion & Analysis (MD&A).
Project Background
National Private Equity Firm was in the process of acquiring two businesses in the infrastructure rehabilitation industry, with a value of ~$10 Million in revenue. Independent CPAs managed finances for the two companies focused on fiscal year tax solely with an accounting system primarily run on a cash basis. Plus, the firm required a closing balance sheet, working capital threshold calculation, and opening balance sheet in conjunction with the closing.
The need became apparent for additional resources and processes in the interim until an internal team could be hired, aligning with the other companies in the PE firms portfolio, managing in decentralized environments.
The DLC Approach
DLC kicked off the six-week consulting engagement with an operations and documentation assessment of the company’s inventory management, Purchase-to-Pay (P2P), Order to Cash (O2C), and Record to Report (R2R) processes. The initial approach focused on aligning to the Private Equity firms reporting requirements, revamping both companies’ QuickBooks chart of accounts, and making necessary adjustments to comply with GAAP.
The project included fair value adjustments on the sellable inventory and fixed assets and an analysis of the future cost of the former owner’s earn-out agreement.
DLC Consultants established a consolidation model, month-end calendar, and standard processes that would allow the companies to close within seven business days and fulfill all internal and external reporting requirements within ten business days.
DLC Executed
- Creation of bad debt reserve, inventory reserve, prepaid expenses, accrued sales commissions, and other accrued expenses
- Completion of closing balance sheet and accompanying working capital analysis
- Purchase accounting and opening balance sheet in accordance with the stock purchase agreement
The Results
DLC Consultants provided the PE firm a streamlined and on-time closing, new financial reporting system, including Management Discussion & Analysis (MD&A).
DLC also assisted (with affiliated career management partner) in identifying the right team to onboard, train, and transition all processes within three weeks of hire. The PE firm was able to successfully acquire, on time, both businesses and integrate them seamlessly into their portfolio.
