A trusted partner in developing a strategy to maximize value and minimize loss
Transactions can include a multitude of accounting, financial and legal considerations. In many cases it is helpful to have a trusted partner who can analyze and validate data and assumptions relied upon in clients' strategic plans. Such collaboration can oftentimes expose unseen risks and uncover overlooked opportunities. Our team has decades of experience specializing in the financial aspects of a transaction and we have the expertise needed to identify key issues and offer creative solutions to help clients successfully close a transaction.
SOLUTIONS & RESOURCES
Due diligence is a precautionary process that reduces transaction risk by collecting and analyzing the material facts of the other party in a business transaction. This enables buyers, investors, lenders, partners and other potential stakeholders in a transaction to fully assess the risk of a transaction. Our services in this area include financial due diligence and can include the preparation of operating budgets, credible forecasts, business integration recommendations and business assessments. Areas analyzed by our team include:
- Quality of earnings and cash flow reporting
- EBITDA bridge analysis
- Quality of financial, inventory, billing, and accounting systems
- Appropriateness of accounting policies and procedures
- History of and likelihood of audit adjustments to interim financial results
- Quality of collateral to secure the transaction in coordination with our Appraisals division
- Potential for off book assets & liabilities and other contingencies
- Quality of internal controls, management routines and oversight
- Assessment of past accuracy and future reasonableness of projections of future financial performance
- Proof of cash
- Strength of financial staff
- Customer and vendor concentration risk assessments
- IT and systems infrastructure review
- Foreign Corrupt Practice Act risk assessment
We are uniquely qualified to analyze commercial and financial information with a high standard of care and attention to potential risk. We have developed our expertise through actual transaction experience and by providing forensic accounting services related to countless disputes over failed transactions. We have converted this experience from the back-end to a front-end due diligence practice that is national in scope. We approach every assignment with an investigative mentality and we communicate our findings in detailed, concise reports.
Quality of Earnings and Cash Flow
A quality of earnings report is a critical step in the due diligence process because it assesses the sustainability and accuracy of historical earnings, as well as the probability of future projections. We analyze a target company's historical financial statements and comparable data on similar companies to accurately generate a benchmark and forecast earnings potential. A full scope quality of earnings report documents risks in a company targeted for an acquisition and assesses three distinct items in a report, including: cash versus non-cash, recurring versus non-recurring and core business versus external factors. This type of reporting provides an independent review of the target company and can often uncover risks or liabilities missed in the buyer's initial assessment. Additionally, it can be used at the board level to provide reassurance that an acquisition is predicated upon sound data. We deliver comprehensive, accurate reports to ensure clients receive information that might impact a potential acquisition.
Anti-Fraud and Anti-Corruption Due Diligence
In addition to traditional "due diligence" in financial transactions, we manage complex due diligence projects to identify potential fraud and corruption risks from third parties. The depth of such due diligence is tailored to match the potential risks and exposure presented. This type of "enhanced" due diligence requires independent investigation and corroboration of third-party information. Along with offshore affiliates, we can provide comprehensive due diligence to comply with DOJ and SEC requirements on Foreign Corrupt Practices Act (FCPA) policies and procedures.
Purchase Price Allocation
A purchase price allocation (PPA) allocates the purchase price to assets and liabilities acquired in the transaction. Potential assets include working capital, personal and real property, and intangible assets. Our team has helped businesses conduct over a thousand PPAs for them to report the opening balance sheet at fair value and satisfy generally accepted accounting principles (GAAP) requirements.
We collect historical and projected financial statements, fixed-asset listings, quality-of-earnings analyses and other data to create a complete picture of a company's value that satisfies auditors, lenders and investors. GAAP and the Financial Accounting Standards Board (FASB) require a timely PPA. Understanding the correct opening fair value is crucial not only for compliance purposes, but also affects all future financial accounting, including earnings and balance sheets.
A solvency opinion provides a level of assurance or reassurance to stakeholders in a transaction as to whether or not an entity is solvent before and/or after the consummation of the transaction. In addition to mitigating legal and financial risks, solvency opinions provide an additional layer of due diligence related to a leveraged transaction, providing evidence of good faith on the part of the company and helping to establish trust between lender and borrower.
Boards of companies, shareholder groups, bondholders, lenders and other parties may desire a fairness opinion in order to help protect their investments and thwart legal liability. The advisors assess the fairness of a proposed merger, acquisition, buyback, spin-off, privatization or other major transaction from a financial perspective. While there is no legal requirement to obtain a fairness opinion when pursuing a transaction, a company's board has a fiduciary duty to the shareholders and therefore, is advised to seek a fairness opinion as part of discharging its fiduciary duties by acting on an informed basis.
Fairness opinions enhance decision making by providing context and highlighting potential implications that incentivized participants in the transaction may overlook. A fairness opinion demonstrates to shareholders and other stakeholders that board members are exercising prudence and care when contemplating a transaction, thereby mitigating certain risks of a shareholder lawsuit.
We have years of experience helping companies in transition understand and realize the maximum value of their assets. Our fairness opinions offer judgment beyond a calculation. We develop a unique and objective analysis for each transaction that assists boards in fulfilling their fiduciary duties and allowing for all parties to proceed with confidence.